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Author: cameron One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 79095  
Subject: Re: Taxes on IRA wthidrawls Date: 2/24/1998 2:10 PM
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<<I'm a long way away from retirement, (35+ years) but I was recently wondering how withdrawals from IRA's are taxed. For example, will capital gains be treated differently than dividends, as they are in ordinary (i.e. non-tax sheltered) accounts? Don't worry, I'm only interested in the current situation -- I'm not asking anyone to guess what the situation will be like in 35 years. :-)

To take a simple and concrete example consider two people, A & B. If A buys 100 shares of a company at age 30 and then sells them off, as needed, when retired, will he be taxed at the long term capital gains rate? If person B, OTOH, puts all his money in the money market, will he be taxed at the same rate as ordinary income?>>

It doesn't matter how the money is invested, when you make a withdrawal from an IRA, it is taxed as ordinary income. So in your example, and I'm assuming both A's and B's money is in an IRA, when the money is withdrawn, both A and B pay tax at their ordinary income tax rate. A will not get to pay the lower capital gains tax rate.

Hope this answers your question,

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