Article Where Beneficiary Acclerated Income Taxes
Does anyone know of an article that describes an instance where a spouse or non spouse withdrew funds from an IRA and accelerated the income taxes. For instance the RMD allows a non spouse to take distributions over 32 years but the non spouse withdraws the entire IRA in year 1
Thanks
Permalink Submitted by Alan - IRA critic on Sat, 2016-09-03 03:26
I think you are probably looking for a spreadsheet showing the cost of lost tax deferral over the applicable distribution period. It would have to assume a marginal rate paid on the lump sum and the mixed tax rate on taxable investments made with the proceeds factoring in some investments generating LT cap gains and qualified dividends and the rest ordinary income taxes based on the marginal rates for each of the succeeding years. I cannot locate such an article. Is this what you are looking for, something to compare the value of the stretch vrs a cashout? Note that some people who are not maxing out their current retirement plans sometimes accelerate inherited plan distributions and use those funds to subsidize increased contributions to their own plans. The taxes are offset by deductions and RMDs from their own plans will start later and be smaller due to the Uniform table. Of course, if they are already maxed out, they cannot do this.