This is where I'm leaning at the moment
Discussion
we did ours two years ago and lost a good chunck of change on the penatly plus exchange/tranfer fees etc, but are now far ahead of where we would have been if we had kept everything in. and sleep so much better knowing it's now safe in cold storage instead of stocks/cash at a bank/ira/whatever
Looked into tax penalties and I see what you’re talking about. 10% up front then about 21% income tax. Really something to think about
My understanding is you have to break it down into 4 parts.... 1) trad ira principle 2) trad ira gains 3) Roth ira principle 4) Roth ira gains
There's a 10% penalty against 1,2, 4
There's a ordinary income tax against 2 and 4
Ordinary income rates depends on your tax bracket. Most people probably fall either in the 22% or 24% bracket. Depends on your AGI.
Of my total balance, personally, I'm looking at losing roughly 19% in penalty and tax, net.
Someone pls pls pls correct me if I'm wrong here
nostr:npub1ppjkfvk0ek3g584gp7qp9d3znwdznadchet7q2aez9r27620n9zs45xvx2 you're a tax guy right? Can you confirm what I wrote is correct?
Hey Bitish,
No, sorry I am not a tax guy. I am thinking nostr:npub147wy3decmxy3vs9u4nse80ha7nkcydt7zdge8lc9gk8ddglh4t6qudjwdr might be however?
Sorry! Got you guys mixed up. You're the Halloween fun guy (still). Chriso is the tax guy!
nostr:npub13cnlldwfhwxd6qf34hnwlfya2m2qrd2zfk0alxnrup6d2fasw9wqxwkzpe I’m coming in on the end of this conversation so it’s possible I’m missing something. Here’s the rules on w/d from retirement accounts (traditional Ira and Roth)
Traditional IRA’s- the amount of distribution will be taxed at normal tax rates and a 10% penalty will apply unless you meet an exception-
Age over 59.5
Distributions that don’t exceed medical expenses for year
(There are other exemptions)
Roth IRA- if it’s been in existence at least 5 years, then you get to treat the money that is distributed as money you contributed (no tax cost) until all contributions are w/d. Then the excess is taxed as ordinary income and there is no penalty. (Ex. Contributions of 25k over 10 year period, now balance is 35k. W/d 25k with no tax consequences…w/d 30k and owe income tax (ordinary rates) on 5k of earnings.
Giving advice without all the facts can be a dangerous game. DM me with specifics if you want and I’ll address any concerns you have.
What your expected tax penalty?