We spend most of our lives saving for retirement by putting funds away in tax-advantaged ways. But many of us forget about planning the withdrawals so that they are tax advantaged as well.
Although there are exceptions, retirement funds generally cannot be withdrawn until we are age 59.5. If taken out sooner there is a 10% penalty that applies in most cases (in addition there may be a state penalty).
A large number of taxpayers do not take distributions until they are forced to at age 70.5, not realizing they might benefit tax wise by taking money out sooner. For example, if you are in a low or zero tax-bracket this year, you can take a certain amount out with no or Read More
Advance planning can, in many cases, minimize or even avoid taxes on IRA distributions and other qualified plan distributions. When contemplating future retirement and when to begin tapping taxable IRA and other qualified retirement accounts, taxpayers need to consider a number of important issues.
Early Distributions (before 59.5) – If funds are withdrawn before reaching age 59 ½, the taxpayer is also subject to a 10% early withdrawal penalty (and state penalties if applicable) in addition to the income tax on the IRA distribution, unless what is referred to as the substantially equal payment exemption is utilized. Under this exception, an early retiree can begin taking substantially equal payments at least once a year over the owner’s life or joint lives of the owner and designated beneficiary. The payments must Read More