Do I have to worry about any special tax consequences on these investments when I retire? That is, if I draw an income stream, will the taxes just be treated as income or will the source (capital gains vs. dividends, interests etc.) be a factor?
2007-09-05 04:44:05 · 5 answers · asked by Wolfithius 4 in Business & Finance ➔ Taxes ➔ United States
Once you become of age and are allowed to begin receiving distributions from your IRA the distributions will be treated as ordinary income and taxed at your regular income tax rate. If you make distributions from your IRA/401k account before you reach the age of 59 1/2 you will be charged a ten percent penalty and the distributions will be taxed at your regular tax rate. There are certain exceptions to the rule but generally you will be charged the 10% early withdrawal penalty. I have listed a source web-site which will give further details on exceptions to the early withdrawal penalty. Hope this helps.
2007-09-05 05:25:43 · answer #1 · answered by D E 2 · 0⤊ 0⤋
There are several, particularly municipal securities. Please note that your 401(k) and traditional IRAs are not tax free; they are tax deferred. That is, you pay taxes on withdrawals as ordinary income. Because it uses post-tax dollars, the Roth IRA does, in fact, grow tax-free. Assuming you have exhausted all of your tax-qualified options, there are annuities and life insurance. Both have gotten an extremely undeserved bad rap. Either option can be terrible mistake if applied to the wrong individual or situation; but either can also be the absolute best solution for a specific need. See a qualified financial advisor and make certain that your decision is based purely on the mathematics and advantages involved.
2016-04-03 04:46:36 · answer #2 · answered by ? 4 · 0⤊ 0⤋
When you retire and start taking distributions the distributions will be taxed as regular income with the sources not being a factor at all.
2007-09-05 04:55:30 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Withdrawals from a 401k or a traditional IRA are taxed as ordinary income. What caused the gain is not taken into account.
2007-09-05 05:06:49 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
One "special" situation is that you are required to start taking distributions (and paying ordinary income tax ) at age 70 1/2.
2007-09-05 07:14:34 · answer #5 · answered by r_kav 4 · 1⤊ 0⤋