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Of course when you made the decision to take the distribution, did you adviser consider all aspects? You probably could have spread distributions over as many as five years to avoid these problems.

Actually, a non-spouse IRA beneficiary can usuallly spread the payments over the beneficiary's lifetime.

I remember doing my parents' taxes for the year my father had to spend 78 days in a nursing home. Without speaking to anyone about it they'd cashed out his IRA, the result being that 85% of their SS benefit was taxable and, just to pour salt in the wound, an estimated tax penalty.

In the ensuing years things have gotten more complicated with the tiered Medicare B premiums and will get worse next year with the already in place additional taxes on incomes above $250,000 for married filers and $200,000 for others.

This has definitely gotten to be a "measure twice, cut once" operation. Always feel free to stop by the Tax Strategies board when you're contemplating something out of the ordinary. Lots of good people monitor that board and can point out potential problems and possibly alternatives.

Rule Your Retirement Home Fool
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