Tax Bracket for 401k and Traditional IRA?

Question

For all those who undrstand the tax implications of the 401k and traditional (not ROTH) IRA's. When finally paying taxes on these pre-tax retirement funds, are you taxed on the bracket you are in when you withdraw the money, or the tax bracket you are in when you put the money in originally? Are there ways to avoid paying the higher taxes on these funds if your tax bracket does change, especially if you bracket changes because of how much you are saving in these funds? Hope that is clear...

Answer 1

The money is taxed at whatever rates are in effect when the money is withdrawn. There is no way to avoid that tax and the only way to reduce it is to not withdraw the funds. Many qualified retirement plans will require you to make mandatory withdrawals once you reach age 70 1/2 but until then the withdrawals are discretionary and therefore the tax is under your direct control.

Answer 2

You are always taxed at you current rate. The beauty of the plans are that you can basically choose how much you want to withdrawal (provided you go over the minimum requirements) and consequently, how much tax you want to pay.

I'm afraid I can't answer how you can tax shelter the money once you take it out of retirement savings.

Answer 3

located the optimal volume which will maximize what your organization places away for you. Then open up a ROTH ira including your financial company and located the optimal allowed in there. A ROTH IRA is After Tax money and because you do now not make too lots besides ther'es no think of approximately attempting to save money with PRE TAX money. The ROTH will enable that money to augment and as quickly as you retire you could desire to pull all that money out with no need taxed on it. you will although could desire to prefer to pay taxes on your 401k and a broadly used IRA as quickly as you retire. you're particularly lots already indoors the backside tax bracket, so putting away money on your 401k won't save you lots. definitely located up on your organization will max out on simply by certainty it fairly is loose money.

Answer 4

taxed at current rate when you withdraw the money and you can't avoid the tax but you can minimize it by the timing of the distributions. That's the main benefit of having both the ROTH and traditional pre-tax accounts so you can minimize the tax without minimizing the distributions.

Answer 5

You are taxed at whatever your rate is when you withdraw the money - it's taxed that year, as ordinary income. No real way around that.