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

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.

Pennsylvania CPA Journal

Read the latest from the Pennsylvania CPA Journal online or via the mobile app and digital edition.

Read More

CPA Now

Get the latest info on professional trends, management, and leadership skills on CPA Now.

Read More

PICPA 2020 Premier Sponsors

Platinum Sponsor

Gallagher Bollinger Logo
CPACharge


Gold Sponsor

Paychex logo


Bronze Sponsor

payroc-logo-hi-res
Capstan Logo 
SWKT_logo_horizontal

Interested in becoming a sponsor? Contact Kelli Comegys for packages and opportunities.