plan/calculations using both ROTH and Traditional IRA
L1: plan/calculations using both ROTH and Traditional IRA
Considering a new SEPP plan, where I can begin withdrawing ASAP. I’m 55-1/2 (born Oct, 1962), and have money in both a ROTH IRA and 3 traditional accounts (taxable when withdrawn).
I’ve done SEPP calculations based on my total IRA assets. Can I set up a plan where I withdraw the required amount primarily from my ROTH this year (to avoid taxable income) but next year withdraw that amount some from the IRA and some from my traditional accounts? Ordo the calculations and withdrawals have to be on a per-account basis?
2018-05-07 15:25, By: Tac, IP: [18.104.22.168]
L2: plan/calculations using both ROTH and Traditional IRA
I do not understand why you would want to proceed as you have described, unless your ROTH IRA balance is not enough to cover your cash needs for the next 4 years, or if you have limited taxable income. Apparently you do not understand the tax regulations concerning ROTH IRAs which I have outlined below. You should talk to a tax professional, or a qualified financial advisor to establish a PLAN for the next 4 years.
You did not provide any information as to the balances in your ROTH & Traditional IRA accounts, nor your cash needs or tax situation.
You can withdraw CONTRIBUTIONS to a ROTH IRA at any age without any tax or 10% penalty. There is a “hierarchy” of distributions from ROTH IRA accounts. CONTRIBUTIONS are withdrawn first, then CONVERSIONS, and then lastly EARNINGS (i.e. accumulated income and appreciation).
You can withdraw CONTRIBUTIONS to a ROTH IRA at any age without any tax or 10% penalty, because the monies used for these contributions were originally taxed, and there was no tax deduction when the contributions were made.
You can withdraw CONVERSIONS OR ROLLOVERS to a ROTH IRA next at any age without any tax or 10% penalty, for the same reason as for Contributions above.
After CONTRIBUTIONS and CONVERSIONS/ROLLOVERS are withdrawn tax-free from a ROTH IRA, then, and only then, are the remaining funds subject to tax and the 10% penalty for early withdrawal if made before age 59 1/2.
Based upon the above regulations, and the amount in your ROTH IRA and your needs and tax situation, I strongly suggest that you develop a PLAN accordingly. In general, I doubt that you will need to set up a SEPP 72-T plan if there is enough money in your ROTH IRA to get you thru the next 4 years TAX FREE. However, if you do not have other taxable income, then it might be advisable to co-ordinate taxable withdrawals from a SEPP 72-T with SEPARATE tax-free withdrawals from your ROTH IRA. Further, a SEPP 72-T will lock you in for 5 years until you are 60 1/2.
2018-05-07 15:52, By: dlzallestaxes, IP: [22.214.171.124]
L3: plan/calculations using both ROTH and Traditional IRA
Thanks — indeed, that strategy will accomplish exactly what I need to do.
2018-05-07 18:45, By: Tac, IP: [126.96.36.199]