Skip to main content
No. of Recommendations: 1
Hi AJ:

Of course, for the large percentage of years where there is a positive total return, you've lost the ability to defer taxes on the growth that would have occurred.

From the context of the thread, I thought we were discussing money that is withdrawn and didn't need to be spent. Hold the investment for at least a year and a day after the withdrawal, and it becomes a long term holding, with lower capital gains tax rates than ordinary income tax rates. Hold it longer, and the tax is deferred even longer. Unlike the Traditional IRA with its mandatory distributions, I'm not aware of any general obligation to sell an after tax position and take a gain in it just for the sake of triggering a taxable event.

Additionally, if you do a withdrawal near the end of the year, and have enough of it withheld to meet your tax safe harbor, you don't have to send the government any estimated taxes throughout the year, nor do you have to worry about underpayment penalties. If the only withdrawal that's done is at the beginning of the year, you won't be able to do that.

I'm a bit confused on this one. I thought that if you have taxes withheld from a distribution, it's considered timely no matter when in the year you take the withdrawal and have the taxes withheld. If what you're really saying is that if you wait until the end of the year, you will have a better picture of your total income and tax burden than if you take the withdrawal early in the year and thus can better target the amount of your withholding, I agree with you.

Discovery/HR Home Fool
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.