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
Discussion
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.