Anyone know of a rough way to figure out what is the right amount of money to take out of retirement without paying too much tax that year?
My income will be the same this year is it was the last, but I want to withdraw some of my retirement. How do you figure out what percent tax you will have to pay?
If you can recommend an "active" group where this would be on topic I would appreciate it.
If you are 70 and 1/2 there is a minimum distribution of about 4%. Since you pay income tax on it, what ever it adds to your total will be taxed at that maximum. Same for anything you take out but there are penalties for early withdrawal. Most I know, myself included, take the minimum distribution.
I forgot to mention I am 52/disabled so there is no penalty to take it out. I called it an IRA. It is actually a Vanguard mutual fund.
Depends on what the definition of "too much" is?
It's pretty simple to estimate if your deductions are also similar to last year's your marginal rate will begin at the point were in last year. Question is where you are wrt the breakpoints which are obtainable from tax tables at the irs site.
If you're subject to AMT or other special circumstances it's more complex, obviously.
misc.taxes.moderated
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On 10/25/2011 8:40 PM, Metspitzer wrote: ...
Well, those two aren't exclusive; you could hold mutual fund shares in an IRA.
If it is a traditional IRA, the income is taxed as ordinary income; if it were a Roth IRA it would not be taxable, if it is _not_ an IRA at all, then it would be either short- or long-term capital gains depending on how long the sold shares have been held.
Anything approximating a real answer will depend on the actual answers.
I would recommend (again) misc.taxes.moderated but figure out and provide the correct information before posting the question.
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On 10/25/2011 7:54 PM, Oren wrote: ...
Agree there, but there are circumstances in which can avoid the early withdrawal penalty even if under 59=1/2 (which OP later indicates is but meets one of them).
If traditional IRA, yes; Roth, no.
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Would note that depending on circumstances (size of the IRA being a significant one), it's possible that if wait the size of a required RMD might drive the taxpayer into even higher marginal tax bracket than would be if were to maximize the margin between existing bracket and the next higher one (assuming under the maximum, obviously). In that case it makes sense to take out at least that amount after 59-1/2 but yet before 70-1/2.
Also, it depends on what one's expected income is going to be going forward outside of the IRA withdrawals and what one uses as estimates (guesses) of future marginal tax rates. One can make at least reasonable presumptions that there's a good likelihood those may be going up. Does one want to gamble on that not happening or not is the question--the devil you know vs the one in the future you don't.
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This concept for IRA withdrawals is called "topping up the bracket". It's basically fairly simple to figure. Look at your 2010 tax return at the line for TAXABLE INCOME (Line 27 on 1040A). Then look at the bracket ranges (ie $0-$8375 = 10% for Single filers)
The difference between Line 27, and the $8375 (in this example) is how much room you have left to stay in the 10% bracket (again this an example). Your Taxable Income, equivalent Bracket, and File Status may vary.
This also assumes you are the correct age, etc to not having an "early withdrawal" penalties, etc. Also IIRC, you must make the withdrawal before DEC 31 to apply to that years return. So you need to do a rough "what-if" return before the end of the year to get a good idea of how much you can "top up the bracket.
in addition to NG misc.taxes.moderated the forum at
I have been doing this since age 59.5, now 67.
BTW, is your Vanguard MF account specifically a Traditional or Rollover IRA account ?? If it's a Roth IRA, or a non-IRA account, then none of this applies.
misc.taxes.moderated Thanks everyone
Metspitzer wrote in news: snipped-for-privacy@4ax.com:
Ask your financial advisor or tax accountant.
Personally, if I did not need the money, I would leave it alone and let it compound tax free. Don't know how your mutual fund is doing but think you can rotate it without penalty.
I did not take any withdrawals from IRA's or 401k until it was mandated and since I still have work income can buy Roth's.
It is a Vanguard mutual fund within an IRA. This alone tells me that you don't quite understand how the thing works and you should probably get a CPA or your HR dude involved to help walk you through it. The IRA withdrawals are complicated.
re: 2) call the fund manager, where you have your funds
I doubt you can talk to the "fund manager" - the person or persons that make the investment decisions within the portfolio. Even if you could, he/she/they are not going to discuss the tax implications of withdrawing money from an IRA.
Perhaps you meant to say:
2) call the custodian of your IRAOn 10/26/2011 1:04 PM, DerbyDad03 wrote: ...
And they can tell them the process by which they can withdraw funds and whether they are qualified or not, but they won't provide individual investor tax advice, either--in fact, they will say the same thing--"talk to your own advisor for tax advice".
Realistically they can't say anything else even if they wanted to; they don't know enough of any client's overall situation to be able to make a considered response just as none of us here can make any actual recommendation; all can try to do is to point out considerations for OP to keep in mind as goes forward. The most reliable one of which is that advice is generally worth at least as little as you pay, and often significantly less. :)
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Very often, the "custodian of the IRA" and the "advisor" are pretty much (or can be) the same entity.
Let's say the custodian of my IRA is a wirehouse known as BFIF (Big Friggin' Investment Firm).
Let's say the Financial Advisor works for BFFF. In most cases, both the name of the firm (the Custodian) and the name of the Advisor is going to be on the client's statement. If the client calls the Custodian and gives them the account number, they should be able to connect them with the Financial Advisor responsible for the account. That Financial Advisor should already know about the client's overall situation or should at least be able to ask the correct questions in order to offer advice, assuming he is following the FINRA Know Your Client rules.
Now, granted, there are many cases where the client has opened an IRA directly with a Mutual Fund company (your Vanguards, Fidelities, et al) and may have opted not to pay for "advice" and may indeed not have anyone legally able to give him advice.
All that said, my response to the suggestion that he "call the fund manager" still stands. There is *no* way the client is going get any advice from the "fund manager" - the person or persons that make the investment decisions within the portfolio.
On 10/26/2011 2:50 PM, DerbyDad03 wrote: ...
IME it is extremely rare the investment adviser/custodian is also the actual person in position to make actual tax advice. Not impossible, but certainly not the norm for the average person. Of course, on average, most folks don't really have either--the custodian is whoever the employer uses in the employer program and the individual rarely if ever talks to any of them--they may ask a HR person how the plan works or get a selection/choice card once a year or so and that's about the extent of involvement.
That again isn't to say that a self-employed individual or the very astute (relatively) employee hasn't taken it upon themself to take advantage of all available services, and has a personal relationship w/ either a specific representative of a large custodial company or w/ a local but it's surely the exception rather than the rule.
Virtually everybody I know (and I myself) will still deal w/ the custodian/investment side via the brokerage or investment advisor but use an accountant or other tax service professional for tax advice and possibly preparation as well. I suppose again like many things, there are tendencies to follow different patterns in different locations of the country, but the above surely is what I've seen/been accustomed to rather than the combined-agent so-to-speak scenario.
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I didn't disagree w/ that at all; that's certainly correct and the individual investor isn't even going to get to talk to them to ask; they're just not publicly accessible, even other than as revealed by annual reports and/or prospectus or the (very) rare other announcement/mailing/report.
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