Withdrawing Money from an IRA
Question
I have an IRA which holds $100K and would like to withdraw some of it to buy a new home. But, I am also collecting Social Security and wish to understand the possible tax consequences of IRA withdrawals. How would my tax situation change?
Answer
Over the age of 59 1/2, withdrawals from IRAs are taxed at your standard income rate. If your only income is social security, your taxable rate could be low, as your Social Security is probably not taxed. If you have other sources of income (pension, etc.) then you would add your withdrawal to your total income and pay the Federal and State tax rate where your new income total falls. It is important to have taxes taken out when you do the withdrawal to prevent a surprise next April. You can base your tax off the most recent IRS tax table here. You don’t want to take out too little in taxes and then owe more money when you file your tax return.
An IRA withdrawal should not decrease your Social Security payments if you are under your full retirement age, only wages and salary income will do that, HOWEVER, it is likely that a part of your social security could become taxable. This is all very general information. To truly determine your taxed owed, if any, I suggest doing some tax planning with a Certified Public Accountant (CPA).
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