Deadline Looms for Retirement Plan Payouts : Finances: Those who reached age 70 1/2 in the previous calendar year must start taking distributions from accounts such as the 401(k) by April 1.

For one group of people who have tax-favored retirement savings accounts, April Fool’s Day has become a special occasion that has nothing to do with practical jokes.

April 1 is the annual deadline for savers and investors who reached the age of 70 1/2 in the previous calendar year to start taking distributions from their individual retirement accounts, Keogh plans, and employer-sponsored 401(k) plans, if they haven’t already done so.

The rules specify that they must take a minimum distribution calculated by a formula using Internal Revenue Service tables of life expectancy.

Otherwise, they face a penalty tax that runs to 50% of whatever amount should have been withdrawn but wasn’t.

The idea is to ensure that accounts such as IRAs and 401(k)s are used as bona fide retirement savings vehicles, rather than just mechanisms for deferring tax indefinitely. The requirement is the same whether you have actually retired or not.

Programs like IRAs, Keoghs and 401(k)s allow savers to take a tax deduction for their contributions each year, and to accumulate earnings in the account through dividends, interest and capital gains without having to pay taxes until withdrawals begin.

You can start taking money out of these accounts at age 59 1/2 without penalty if you want or need to do so. But you also have the option of leaving the money untouched until as late as age 70 1/2, which gives your money a lot more time to grow without being taxed.

At that stage, however, you must begin withdrawals each year based on the total in your account divided by your statistical life expectancy in years, or the life expectancy of the last survivor between you and a beneficiary you have designated.

Ideally, people who don’t want to take any distributions until the last moment should still start planning for them as early as possible.

“The rules for determining minimum required distributions are complicated,” points out the J.K. Lasser Institute in its “Your Income Tax 1993” guide.

“Contact your plan administrator well in advance to determine your options in selecting beneficiaries and figuring a payout schedule.”

After taking a first distribution by April 1, a person who reached age 70 1/2 in 1993 will have to take succeeding annual distributions by the end of each calendar year.

That means that a second distribution will need to occur this year. If the amounts involved are of any significant size, this can cause problems in other areas of your income taxes, such as estimated quarterly payments that may have to be made.

So the year when distributions from a retirement plan begin often turns out to be a time for extra work, and possibly extra consultations with a tax adviser, beyond the normal tax planning efforts.

There is a further wrinkle in the procedure to help guard against the risk of exhausting the money in a retirement account prematurely, in the event that a saver lives longer than his or her statistical life expectancy.

“Unless the IRA or trustee provides otherwise, the life expectancies of the owner and spouse are redetermined each year,” notes H&R; Block in its current “Income Tax Guide.” Thus, the amount of each succeeding minimum distribution is likely to vary.

Of course, you can always take more than the minimum whenever you wish. But the more you can leave in the account, the more it can continue to earn tax-deferred for as long as the rules will allow.