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Old 10-25-2016, 04:24 PM
 
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A large part of my retirement income will be from what my union calls an annuity account. A portion of my pre tax wages were put into an account to grow tax deferred. How does the IRS view disbursements from this type of account?
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Old 10-26-2016, 10:52 PM
 
Location: Los Angeles
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Quote:
Originally Posted by hevysrf View Post
A large part of my retirement income will be from what my union calls an annuity account. A portion of my pre tax wages were put into an account to grow tax deferred. How does the IRS view disbursements from this type of account?
Taxed as ordinary income.
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Old 10-27-2016, 04:02 AM
 
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It depends on whether the annuity is in a taxable account or an IRA. If the annuity is in a taxable account, the first withdrawals are considered to be from earnings – which are taxed in your top income tax bracket – and any remaining withdrawals are considered a tax-free return of your principal/

if in a tax deferred account it is just all income .


while it is taxed at regular rates the chart posted is way way off from the whole deal .

as little as a 1% dividend or distribution over the long term can wipe out the lower capital gains rate advantage . the math shifts the results on those low rates when yearly taxes have to be paid on the invested money .

kitces looked in to this and found 1% over decades of time made the deferred money a better deal . the more turnover funds have the more the distributions can hurt a taxable account.

https://www.kitces.com/blog/asset-lo...-time-horizon/
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Old 10-27-2016, 08:58 AM
 
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"Ouch"
Thank you, it is a tax deferred Taft Hartley multi employer plan. Social security and defined pension benefits are also ordinary income?

Last edited by hevysrf; 10-27-2016 at 09:19 AM..
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Old 10-27-2016, 09:40 AM
 
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social security taxable income is a bit complicated, since the taxable amount varies with what is called modified adjusted gross income - which basically adds tax free income (from a tax free bond fund for example) back into your gross income.

When you max out, 85% of your SS income will be taxed as ordinary income.
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Old 10-27-2016, 10:58 AM
 
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as well as what you pay for medicare is linked to income too .

once those rmd's kick in all kinds of nasty's can happen tax wise
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Old 10-27-2016, 11:19 AM
 
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^ your Medicare part B premium is linked to income, but fortunately the bands are pretty broad. The first Income Related Monthly Adjustment Amount (IRMAA). kicks in at $85,000 single/170,000 married. Bad news is that it looks back two years, so new retirees can be hit hard unless they take advantage of one of several exceptions, which are administrative nightmares.
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Old 10-29-2016, 12:58 AM
 
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we have more bands going into effect in 2018 using 2016 income . 133,500.00 kicks in a new band .

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Old 10-29-2016, 02:50 AM
 
Location: Las Vegas
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This stuff gets so complicated! I need a translator to understand it
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Old 10-29-2016, 03:20 AM
 
Location: Central New Jersey
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Quote:
Originally Posted by Tornado Baby View Post
This stuff gets so complicated! I need a translator to understand it
Agreed
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