Money in IRA vs Brokerage
I’m in the 28% fed tax bracket transitioning to retirement. Every year I automatically reinvest substantial taxable mutual fund distributions which are 90% long term gains and qualified dividends taxed at 15% and are held in a taxable brokerage account. Up until now I have used earned income to pay the tax but that income will soon cease.
My question: Going forward and in order to pay the taxes that I owe, am I financially ahead if I withdraw money from my regular IRA or
should I first use some or all of the mutual fund distributions to pay the tax. My investment options are the same with both the IRA and brokerage.
Thanks
Permalink Submitted by Al Fry on Mon, 2007-10-29 18:36
This is kind of an age-old (at least post-stretch outs) question. Some people might say IRAs and NQ annuities are not good assets to die with, since they are subject to both estate taxes on the entire balances and income taxes on anything in excess of cost basis. However the tax law does allow a deduction for estate taxes attributable to gain (IRD). Capital gains assets, howver get a cost-basis step-up at death, if includible in one’s estate. Others would say, no, keep IRA assets intact as long as possible, for a stretch-out to heirs. So one has to weigh the consequences of each with their objectives, tax brackets of themselves and heirs, etc.
Permalink Submitted by paul chase on Mon, 2007-10-29 19:21
Thanks for the response. If I look at it only while I am alive with no concerns after my death and no gifting while alive, which would be the most financially advantageous for me while living. Is there a published formula, flow chart or algorithm I can use to answer the question?
Thanks