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Old 12-19-2015, 10:16 AM
 
113 posts, read 169,488 times
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I have an IRA that's valued at $150,000. I want to withdraw it in order to buy a new home. When I told the bank rep this, he told me income tax is a factor I should consider before I decided to withdraw the money. I am 63 years old single with no dependents living on a NYS pension. I plan to wait till I'm 66 to start getting social security. Currently, I don't pay NYS income tax. I think for Fed income tax I'm in the 15 percent bracket. I do my own taxes with an online app. but I just fill in the blanks. If I withdraw the IRA, how much of it will I have to pay in income taxes (state and fed)? Also, would I be taxed at a lower rate if I withdrew the money at the mandatory minimum age 70 (or whatever the age is when I have to start withdrawing my IRA at a minimum amount each year)?
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Old 12-19-2015, 10:27 AM
 
Location: MMU->ABE->ATL->ASH
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Well, I know this does not help.

But if you are @ the 15% tax bracket, You should have been moving money out since you were 59.5 into a Roth. And paying the taxes @ the 15% rate.

To do the withdraw of 150K will push you up into the 25-28% Bracket.

NYState will get its cut also.
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Old 12-19-2015, 10:28 AM
 
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Google Dinkytown 1040 and fill in the blanks at that site. It will give you a very good idea of your income tax liability and will tell you your marginal tax rate and your income tax bracket
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Old 12-19-2015, 10:34 AM
 
Location: Idaho
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Blanco111,

IRA withdrawal is considered regular income subjecting to both Federal and NYS tax.

You have to add the expected IRA withdrawal amount to other taxable income to see what tax bracket that the total amount will bump you up to.

When you turns 70.5 years old, you will have to take RMD (required minimum distribution). You have to pay taxes on IRA withdrawal whether it is RMD or not. If you expect you rincome will be lower in the future then the tax on your IRA withdrawal will be lower simply because of lower total income.

Another thing to keep in mind is that withdrawing IRA thus adding to your income will reduce your SS benefit. Your IRA withdrawal is treated the same as 'earned' income because it is tax-deferred saving.

https://www.ssa.gov/planners/retire/whileworking2.html

Quote:
In 2015, the annual earnings limit is $15,720 if you’re under full retirement age. If you will reach full retirement age in 2015, the limit on your earnings for the months before full retirement age is $41,880.
My sister withdrew money from her 403b to buy a house when she was 66 years old and was surprised to see her SS payments got reduced.
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Old 12-19-2015, 10:51 AM
 
Location: Hiding from Antifa?
6,424 posts, read 4,186,192 times
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Quote:
Originally Posted by BellaDL View Post
Blanco111,

My sister withdrew money from her 403b to buy a house when she was 66 years old and was surprised to see her SS payments got reduced.
Was it due to her Part B and Part D premiums going up because they can be increased due to high income in a recent year? If she was on SS at 66 she was at FRA and the SS payment should not have been affected.
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Old 12-19-2015, 11:16 AM
 
Location: Albuquerque, NM
1,428 posts, read 2,573,407 times
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It's going to affect your income, as noted above. If you don't have time to pull money out in small chunks annually, you could at least run the numbers to see if it would be worthwhile to pull some out before the end of 2015 and the rest in 2016.
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Old 12-19-2015, 11:28 AM
 
71,736 posts, read 71,853,273 times
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Quote:
Originally Posted by Cruzincat View Post
Was it due to her Part B and Part D premiums going up because they can be increased due to high income in a recent year? If she was on SS at 66 she was at FRA and the SS payment should not have been affected.
that is all it could be , medicare is income linked
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Old 12-19-2015, 12:14 PM
 
Location: Great State of Texas
86,093 posts, read 72,556,082 times
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Quote:
Originally Posted by Blanco111 View Post
I have an IRA that's valued at $150,000. I want to withdraw it in order to buy a new home. When I told the bank rep this, he told me income tax is a factor I should consider before I decided to withdraw the money. I am 63 years old single with no dependents living on a NYS pension. I plan to wait till I'm 66 to start getting social security. Currently, I don't pay NYS income tax. I think for Fed income tax I'm in the 15 percent bracket. I do my own taxes with an online app. but I just fill in the blanks. If I withdraw the IRA, how much of it will I have to pay in income taxes (state and fed)? Also, would I be taxed at a lower rate if I withdrew the money at the mandatory minimum age 70 (or whatever the age is when I have to start withdrawing my IRA at a minimum amount each year)?
You could break it up..some this month for 2015 taxes and some next month for 2016 taxes.
That would make the $75K your income for the year plus whatever other income you get for taxes.

Just be prepared to pay those taxes come April. And you would no longer be in the 15% bracket.
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Old 12-19-2015, 12:22 PM
 
Location: Eureka CA
8,264 posts, read 11,130,236 times
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Consider getting professional help with your taxes. It's WELL worth the expense.
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Old 12-19-2015, 12:36 PM
 
Location: Florida
4,373 posts, read 3,710,800 times
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Go to your last years tax return and add x dollars as interest income. Then see how much your taxes go up. That is your answer assuming tax rates are the same this year. If you know the tax bracket you are in you will pay that Percent of the IRA withdrawal. But as single tax payer you could pay 28% to 33% for Federal taxes. See 2015 Federal Tax Rates, Personal Exemptions, and Standard Deductions | US Tax Center. State taxes are probably the max rate for at least part. You could lose $50,000.
I think the interest on a mortgage would be less costly than the tax so go the mortgage route and you can withdraw money from the IRA to pay the mortgage. Before you take out the 150,000 get a CPA to review.
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