Getting Your Financial Ducks In A Row Rotating Header Image

5 Comments

  1. clydewolfNo Gravatar says:

    You wright, “For a Roth IRA, of course there’s no tax on the withdrawal.”

    Most of the time that will be true. But when the ROTH IRA owner is 59 1/2 and you have not owned a ROTH IRA for at least 5 years, While there is no penalty for distributions, Earnings distributed from your ROTH IRA will be taxable as ordinary income.

    I often suggest folks get a ROTH IRA early in life to eliminate that 5 year ownership requirement later in life.

    1. jblankenshipNo Gravatar says:

      Agreed, Clydewolf. Nice catch!

  2. Jim ANo Gravatar says:

    Jim, what about rolling a chunk of the pre-tax IRA or 401-k money to a Roth IRA? Looking from a distance (I’m not there yet!) that if one retires before age 70 and has much lower income, then there is a window of opportunity to pay the tax at a lower rate, while continuing tax-preferential treatment in a Roth, and not have the RMD later, either. Do I have that right or is it not quite so clear as that?

    1. jblankenshipNo Gravatar says:

      Hi Jim –
      Yes, that’s a great option to use during the years between 60 & 70, since you can set the amount that you withdraw and control the tax hit. This will help to reduce your RMDs later.

      jb

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