Seniors: Don't Forget April 1

The tax law states that you must start taking mandatory payouts from traditional IRAs (but not from Roths) no later than April 1 of the year after the year you turn 70 1/2. So if you turned 70 1/2 in 2007, that deadline is rapidly approaching. Of course this also means you get stuck with the resulting income-tax bills. (The whole idea here is to make people who would otherwise leave their IRAs untouched to start taking taxable withdrawals.) And if you fail to take at least the minimum withdrawal amount by April 1, the IRS can sock you with a penalty equal to 50% of the shortfall. So this little rule isn't something you can afford to ignore.

Now, if you already took IRA withdrawals last year (or earlier this year) that equaled or exceeded the amount of your initial required minimum withdrawal, then you're blissfully unaffected by the April 1 deadline. Instead, you simply must take your next withdrawal by the end of this year.

But if you didn't take a withdrawal last year, then here's what you need to do. Use a joint life-expectancy figure (generally based on your age and someone 10 years your junior) to calculate your initial required minimum withdrawal. (Even those who don't have a designated beneficiary use the joint-life-expectancy figure.) And don't forget: By Dec. 31 of this year, you must also take your second required minimum withdrawal. (Click here for more on calculating minimum IRA withdrawals.)

Keep in mind that the IRA minimum-withdrawal rules also apply to simplified employee pension (SEP) accounts and Simple IRAs because they're also considered traditional IRAs for this purpose. Roth IRAs, on the other hand, are exempt from the minimum-withdrawal rules as long as the original account owner is alive.