As someone who is not working, should I start removing from my IRA now to keep my tax bracket lower later?

by Alan M. Schapire, CPA | Jun 12, 2019

askacpaiconShould I start removing funds from my IRA now to keep my tax bracket lower later on? (I'm not working.) Would there be a difference in taxes to be paid if I had a much higher income at age 70 (Social Security, pension, annuity, IRA distributions)?

This seems like a simple question, but it has complex implications. Assuming that you are 59 ½ years old, and would avoid the early withdrawal penalty, the short answer is yes. To the extent that you can smooth your income and benefit in any year from lower tax brackets, you should begin taking IRA distributions before the required minimum distribution (RMD) age. However, you really need to factor in your cash flow needs and complete a multiyear tax projection, and possibly consider a conversion of the pre-RMD distributions to a Roth IRA. It may be a good idea for you to consult a CPA for assistance on the process.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Alan M. Schapire, CPA, is a principal with Convergent Financial Strategies LLC in Wayne, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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