| How to get money out of an IRA |
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JeffNY
New Member
Cash: $ 0.85
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Joined: 08 May 2007
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| How to get money out of an IRA |
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Hi,
Can someone help me understand how IRA's work? It does NOT work like an investment, correct?
For example, say in 2000 I bought a mutual fund for $1000 and now its worth $1500. If I sold it I would have $1000 basis and pay long term capital gain tax just on the $500.
Now, if in 2000 I bought an IRA mutual fund for $1000 and today it is worth $1500 and I want to take all or part of it out (assuming I am 59.5 years old) is the entire $1500 taxable income (in the year its taken out)? Is that how it works?
I am actually 45 and I have worked since I was 17, but I have had a disability (Dystonia) since I was 13. In my older age it is catching up with me and I am finding it more and more difficult to work. I would like to start drawing off some of my IRA savings to help me live on. Does anyone know the process to be classified as "disabled" so I can avoid the 10% penalty? In 9.5 years I will have income from a rental property I own (that currently has a mortgage). But I need to figure a way to live until then.
Thanks,
Jeff
http://www.dystonia-foundation.org/
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Tue May 08, 2007 3:22 pm |
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JeffNY
New Member
Cash: $ 0.85
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Joined: 08 May 2007
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Thanks Tim...
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Tue May 08, 2007 8:13 pm |
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JeffNY
New Member
Cash: $ 0.85
Posts: 4
Joined: 08 May 2007
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>>I'd suggest transfering a good portion of the assets to less risky investments.<<
Saturday night I totalled up my IRA funds. Some did quite well. They totaled $150,002.57 as of 5/4/07. If I could even get a 4% or 5% return that may be enough to help me make ends meet - without losing any principle (except through inflation).
Are there any funds (maybe a bond fund) anyone could suggest that might return 4% to 5%?
Thanks,
Jeff
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Tue May 08, 2007 11:08 pm |
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efflandt
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Location: Elgin, IL USA
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You can search irs.gov for anything related to IRA's. Publication 590 covers most of what you need to know. They sort of explain what is required to take early distributions without the 10% penalty towards disability expenses.
For employer plans like 401(k) there is an exception to the age 59.5 rule where if you "retire" early and are at least age 55 you can take substatially equal withdrawls (or related to expected life expectancy?) without the 10% penalty, but you have to do that for at least 5 years. However, I cannot find anything that applies that to IRAs.
In any case if you make a withdrawl from a retirement account, you would be liable for tax on anything but the pro-rated portion of any after-tax contributions (see form 8606). I believe whoever distributes retirement funds is required to withhold 20% towards tax that would be due.
BTW money market funds currently pay about 5% (probably some CD's too) and are much safer in the short term than bond funds.
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Tue May 08, 2007 11:43 pm |
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JeffNY
New Member
Cash: $ 0.85
Posts: 4
Joined: 08 May 2007
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FYI I contacted Fidelity (where I have some of my IRA's) and they said I had to contact the IRS about being qualified as "disabled". I also emailed the local guy who handled our Simple IRA plan through work. When / If I find out the poceedure I'll post it here.
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Wed May 09, 2007 12:15 am |
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