UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: galtsgulch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Taxes on IRA wthidrawls Date: 2/24/1998 11:18 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
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?

cheers,
John Power
Print the post Back To Top
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: 1946 of 74759
Subject: Re: Taxes on IRA wthidrawls Date: 2/24/1998 2:10 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
<<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 So in your example, and I'm assuming both A's and B's money is in an IRA, when the money is withdrawn, both A and B pay tax at their ordinary income tax rate.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,

Cameron

Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1949 of 74759
Subject: Re: Taxes on IRA wthidrawls Date: 2/24/1998 5:43 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
John,

<<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?>>

As Cameron pointed out, in a traditional IRA there is no capital gains rate. All untaxed income and earnings will come out of that vehicle subject to ordinary income tax rates in effect at the time of withdrawal.

Regards…….Pixy


Print the post Back To Top
Author: galtsgulch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1962 of 74759
Subject: Re: Taxes on IRA wthidrawls Date: 2/25/1998 11:17 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TMFPixy & cameron,

<<in a traditional IRA there is no capital gains rate. All untaxed income and earnings will come out of that vehicle subject to ordinary income tax rates in effect at the time of withdrawal. >>

thanks for your answers, they were right on the money!

cheers,
John Power

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement