The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • Submit an Article
  • Books
  • Categories
  • Coaching
  • Book Lynnette
  • Money Coach University™
No Result
View All Result
The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • Submit an Article
No Result
View All Result
The Money Coach
No Result
View All Result

What are the Age Rules Regarding an IRA Withdrawal?

Lynnette Khalfani-Cox, The Money Coach by Lynnette Khalfani-Cox, The Money Coach
in Investing
Reading Time: 3 mins read
295
SHARES
4.9k
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

Q: I am retiring and want to roll over my deferred account to an IRA. Which is the best IRA account? And how old do I have to be to withdraw without getting penalized? And what will the tax rate be?”

A: Under current IRS guidelines, you must be at least 59 1/2 years old in order to make a withdrawal from a traditional IRA without being hit with a 10% penalty.

Of course, just because you can start making those IRA withdrawals at age 59 1/2 or older without penalty doesn’t mean that you should start withdrawing your money. Generally speaking, the longer you can wait, the more time you’ll allow your nest egg to grow and the greater your investment savings will be — assuming that your investments are performing well.

Another age requirement with a traditional IRA is that once you turn 70 1/2 years old, you must begin your IRA withdrawals by April 1st of the following year.

In other words, if you don’t start taking IRA withdrawals by the time you hit 59 1/2 – and if you don’t make withdrawals while you are in your 60s – you will be required to do so by April 1st of the year following the year in which you turn 70 1/2.

Different rules apply to ROTH IRAs. You can make withdrawals of your contributions tax free and penalty free at any time. Additionally, you can withdraw your ROTH IRA earnings tax free and penalty free as long as you’ve had the account at least five years.

You asked which IRA is best. I assume you meant which type of of IRA is better: a traditional IRA or a ROTH IRA?

With a traditional IRA, the advantage you get is an upfront tax deduction for your contributions, provided that you qualify — based on your income and other factors. With a Roth IRA, the highlight of these plans are that withdrawals are tax free on the back end — after the accounts have grown due to capital gains. So a lot of people prefer ROTH IRAs because none of knows what our tax bracket and tax rates are going to be in the future. So having a Roth IRA can be especially attractive since you can keep for a long period of time, have it appreciate, and then make tax-free withdrawals whenever you choose to do so.

Now, the caveat of course with the Roth IRA, is that if you’re going to do a rollover or a conversion by taking a lot of your existing retirement money (such as 401(k) funds) and turning that into a Roth IRA, any previously untaxed amount is considered “distributed” to you. Therefore, that amount of the conversion/rollover is counted as part of your gross income, and you’re going to have to pay taxes on those monies. So you have to take into consideration that as well.

Finally, in terms of the tax question you asked about, you wanted to know what will the tax rate be once you start withdrawing money from the IRA. Well, as I mentioned, as long as you put it into the ROTH IRA for five years, then you get to take those contributions out tax free. No taxes there.

However, with the traditional IRA, the tax really depends on your own individual tax bracket. Your withdrawals are taxed at your marginal tax rate. This rate varies based on your income and tax filing status — such as, are you single? Are you a head of a household? Or are you married and filing jointly? All of that matters.

Since I don’t know your specific info, here’s a quick chart that shows you a snapshot of your tax bracket based on your unique household income and filing status.

Tax Bracket Single Married Filing Jointly Head of Household
10% Bracket $0 – $8,500 $0 – $17,000 $0 – $12,150
15% Bracket $8,500 – $34,500 $17,000 – $69,000 $12,150 – $46,250
25% Bracket $34,500 – $83,600 $69,000 – $139,350 $46,250 – $119,400
28% Bracket $83,600 – $174,400 $139,350 – $212,300 $119,400 – $193,350
33% Bracket $174,400 – $379,150 $212,300 – $379,150 $193,350 – $379,150
35% Bracket $379,150+ $379,150+ $379,150+

At the very low end, you might be in the 10% tax bracket. And that’s for folks who are single, making up to $8,500 in 2011; or married persons making up to $17,000; or a head of household making a up to $12,150 a year.

Most people are going to fall somewhere in the 15%, 25% or 28% tax brackets.

Or maybe you might even be in the 33% tax bracket if you are at the pre‑retirement phase and are a high income earner. The top tax rate is 35% for those earning $379,150 and above.

Tags: IRARoth IRA
Previous Post

When to Refinance Your Mortgage

Next Post

New Bank Fees Are Coming: Here’s What to Expect

Related Posts

Trade and Travel Live-2023 Teri Ijeoma

2023 Trade and Travel Conference Special Offer

by AskTheMoneyCoach

Teri Ijeoma's Trade and Travel Conference is an excellent opportunity for those interested in learning how to trade and travel. The conference offers a chance to learn from Teri Ijeoma, the founder of Trade and Travel, and connect with a community of like-minded individuals. This post contains affiliate links. If...

Two businessmen working together, forex diagrams hologram and big business data analysis. Double exposure hologram with candlesticks and chart. Concept of teamwork and trading

The Basics of Forex Trading for Beginners

by AskTheMoneyCoach

Forex trading can be lucrative for anyone willing to put in the effort to learn the basics. While it can initially seem overwhelming, with some knowledge and practice, anyone can become a successful part-time forex trader. This article will cover the ten basics of forex trading that every beginning trader...

Web wide portrait of happy African American man investor recommend financial app on cellphone, white mockup screen. Millennial male trader work trade online on computer. Stock market, crypto.

7 Benefits of Cryptocurrency in 2023

by AskTheMoneyCoach

Cryptocurrency, which is a form of virtual currency utilizing secure cryptography techniques and independent of government or financial institutions, is becoming increasingly popular in the dynamic digital landscape. This article will delve into the seven benefits of employing cryptocurrency in 2023 without introducing new information or facts. What is Cryptocurrency?...

Forex trading, Young man using smartphone and laptop computer with Forex icon on VR screen on desk, Online investment. Business, internet and technology concept.

The Basics of Part-Time Forex Trading

by AskTheMoneyCoach

Trading foreign currency has become a popular side hustle to generate part-time income. The global market for currency exchange offers lucrative investment potential, but prospective traders still need to understand the fundamentals to make the most of their predictions. The foreign exchange market – or forex market – is a...

Man holding planet by two hands for earth day and saving energy environment concept ,Element of this image from NASA and 3d render.

Understanding ESG Investing and Its Benefits to Businesses

by AskTheMoneyCoach

Many companies have considered adopting ESG strategies because they believe the world is changing. Besides, some investors feel obligated to support companies with good environmental and social policies. In this article, we will briefly explain what ESG investing is and the benefits of investing in an ESG strategy as a...

Compound Banc App on mobile phone

Compound Banc Launches New Investment App

by AskTheMoneyCoach

Compound Banc is a financial technology (Fintech) company that provides access to institutional-quality real estate investments and products to retail investors. They offer low-cost, tax-advantaged investments with fixed contractual returns, unlike other investment instruments where past performance is not necessarily indicative of future returns. PRESS RELEASE NEW YORK - February...

Trade and Travel

The Epic Guide to Teri Ijeoma’s New Trade and Travel 2.0 Course

by Lynnette Khalfani-Cox, The Money Coach

If you’re considering trading stocks – which is also known as “active investing” – chances are you may have heard of Teri Ijeoma, creator of the popular Trade and Travel course. She’s been featured as the #1 course creator on Teachable and profiled in various media, from Forbes to Black...

Load More

Popular Posts

  • Car repair

    What to Do If You Can’t Afford a Car Repair Bill

    1526 shares
    Share 610 Tweet 382
  • What to Do if Your Spouse Stole Money From You

    1308 shares
    Share 523 Tweet 327
  • What to Do If You Can’t Afford to Leave Your Spouse

    1273 shares
    Share 509 Tweet 318
  • Here’s Why I Pay My Kids For Good Grades (And Maybe You Should Too)

    1129 shares
    Share 451 Tweet 282
  • What Do All Those Strange Codes In My Credit Report Mean?

    899 shares
    Share 360 Tweet 225
  • Which Credit Report is More Important: Equifax, Experian or TransUnion?

    866 shares
    Share 346 Tweet 217
  • Do This Now If Your Wages Were Not Reported

    853 shares
    Share 341 Tweet 213

Categories

  • Bankruptcy
  • Budgeting
  • Building Wealth
  • Careers
  • Couples and Money
  • Coupons and Deals
  • Covid-19
  • Covid-19 Video
  • Credit Cards
  • Credit Reports
  • Credit Scores
  • Crypto
  • Debt
  • Entrepreneurship
  • Family Finances
  • Featured
  • Identity Theft
  • Insurance
  • Investing
  • Loans
  • Paying for College
  • Personal Finance
  • Press Releases
  • Real Estate
  • Retirement
  • Saving Money
  • Scams
  • Student Loans
  • Taxes
  • Uncategorized

All information on this blog is for educational purposes only. Lynnette Khalfani-Cox, The Money Coach, is not a certified financial planner, registered investment adviser, or attorney. If you need specialty financial, investment or legal advice, please consult the appropriate professional. Advertising Disclosure: This site may accept advertising, affiliate payments or other forms of compensation from companies mentioned in articles. This compensation may impact how and where products and companies appear on this site. AskTheMoneyCoach™ and Lynnette Khalfani-Cox, The Money Coach® are trademarks of TheMoneyCoach.net, LLC.

©2009-2023 TheMoneyCoach.net, LLC. All Rights Reserved.

RSS / Sitemap /Submit an Article / Privacy Policy / LynnetteKhalfaniCox.com

No Result
View All Result
  • Books
  • Categories
  • Contact Lynnette
  • Get Coaching
  • Book Lynnette
  • Money Coach University™
  • Home
  • Subscribe to Newsletter
  • Submit an Article

©2009-2023 TheMoneyCoach.net, LLC. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist