4

After reaching 70 I have always taken the minimum required amount from my IRA each year. If I understand correctly, I have to make this decision by December.

I do not usually know what my other income is until around the February of the following year. At that time I can sometimes see that it would have been beneficial taxwise to have taken more than the minimum required from my IRA, but by then it's too late to make a change. It's kind of annoying that it works this way. Or does it? That's the question, and is there a solution?

  • 1
    Question - why do you not know what your other income is? Do you mean, you don't know because it's passive income (dividends etc.), or it's just hard to tell until you get a W2 etc.? – Joe Sep 26 '16 at 21:12
  • Dividends and interest not usually known till February also income from consulting work not usually known till then. When putting money into an IRA you have until April to work out the amount for similar reasons that the exact income is not known until information comes in. Why isn't it viewed similarly at the time one has to withdraw – peter Clarke Sep 26 '16 at 21:25
  • 1
    Can you elaborate on how it's beneficial for you to take more than the minimum required? Are you trying to fill out a tax bracket to the max so that you don't have to take as much the year after? – Chris Sep 27 '16 at 19:49
  • @Chris - That's how I read the words "Optimal IRA Distribution." Topping off the current bracket. – JTP - Apologise to Monica Sep 27 '16 at 20:26
3

It depends what optimum means. Say you wish to hit a certain taxable income number, $38,000, to chose a number near the 15%/25% marginal rate line. In November, you're not sure where you'll end. You take $10,000 and convert to Roth. In April, you see you are at $40,000 taxable. You recharacterize $2,000 and nailed the $38,000 to the penny.

Once you have a Roth for 5 years, there's no penalty on withdrawal of deposits or growth (as you are over 59.5).

If this suggestion doesn't help, please clarify the question.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.