Posted by MarkB_MI on January 31, 2015 at 02:19:04 from (70.194.0.224):
In Reply to: Retirement taxes posted by vscummins on January 30, 2015 at 17:26:04:
Whether it's a retirement plan, 401k or IRA, it's pretty straightforward: if your contributions were taxed when you put them in, you don't pay tax on the amount of AFTER-TAX contributions. But anything above the after-tax contributions, including any pre-tax contributions, is subject to tax.
I assume none of her retirement is in a Roth IRA; the rules for a Roth IRA are different.
If we are talking about a defined benefit pension plan, she will probably have multiple options for how to take her pension. Right now, the interest rate used to calculate lump-sum distributions is quite low (~1 percent). The lower the interest rate the higher a lump-sum distribution will be relative to an annuity. For this reason she should consider taking a lump sump (or the shortest possible period certain distribution) and roll her taxable distributions into an IRA. That way she doesn't pay taxes until she actually draws the money out of the IRA.
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Today's Featured Article - The 8N and the Fox - by Zane Sherman. Dec. 13 1998, Renfroe, Alabama. Last niht I dreamed about the day that I plowed the field of about 10 acres over on what Jimmy and Dandy called the Ledbetter field. I was driving the 1948 8N Ford tractor that Jimmy bought in 48 new This was prebably in about 1951 and maybe even befor the house was built. This would have made me to be about16 years old and I drove the tractor for nothing and would have paid to drive it if I had had any money which I didn't, but neit
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