IRA withdrawals can be tricky

DEAR HARRY: I am 71 and my wife just turned 69. She has an IRA in the form of CDs from a local bank. It has about $75,000 in it due at different times through the next three years. So far, we have not needed any of this money to live on. We do take the interest. My pension and our Social Security have been almost enough for us. The bank has told her that she'll have to start taking the basic money (they called it "principal"). They did not tell me when or how much. They wouldn't tell me anything because of some privacy rule. Please tell me where she stands?

WHAT HARRY SAYS: Most ofcoursely. The bank is right about the privacy rules. Here's how it works. She must start to withdraw a "required minimum amount" in the year in which she becomes 70 1/2.

That will be 2013. Normally, the full amount taken will be taxable income. There is an exception to this. She may delay her first withdrawal until April 1, 2014. However, if she does this, she'll also have to take her regular 2014 withdrawal by Dec. 31, 2014. That's two in one year. Barring some very unusual circumstances, this is rarely a good choice. The bank is required by law to tell her what she must draw. Incidentally, there is a stiff 50 percent penalty for underwithdrawing. For example, if her required minimum is $5,600 and she takes only $5,000, she'll get hit with a $300 penalty.