| Take Money From IRA or Sell I bonds? |
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Beachman
New Member
Cash: $ 0.70
Posts: 3
Joined: 20 Jul 2011
Location: Santa Cruz
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| Take Money From IRA or Sell I bonds? |
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My wife and I are retired and are purchasing a new recreational vehicle. Our income is solely from my social security and my small pension. Our income has been low enough for the past several years, where we have had no tax liability. I'm 65 and we have no debt.
Our savings are quite adequate and about equal in I bonds and my IRA. Both are generating about the same amount in interest.
We're going to pull $40,000 out from these savings to pay cash for the RV and wondered what source of the money would present the least amount of tax liability.
We look forward to any suggestions.
Thank you
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Wed Jul 20, 2011 4:29 am |
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coaster
Senior Advisor
Cash: $ 1357.80
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Joined: 11 Oct 2005
Location: Wisconsin
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You're asking about tax, so I suppose you've got a Traditional IRA, correct? You'd pay whatever your marginal ordinary income tax rate turns out to be with that added on to your other income. You'll pay that in the year you take it.
I Bonds are exempt from state income tax. Federal tax gets complicated, naturally, here's an article:
http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_itaxconsider.htm
But basically, it looks like you pay tax on the accrued interest in the year you redeem the bonds. Interest is taxed at ordinary income tax rates.
So the difference, that may swing the decision, is the state tax exemption on the I Bonds.
Hope that helps. 
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Wed Jul 20, 2011 6:14 am |
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Beachman
New Member
Cash: $ 0.70
Posts: 3
Joined: 20 Jul 2011
Location: Santa Cruz
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Thanks coaster...... appreciate your comments. Learning all the time 
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Wed Jul 20, 2011 7:19 am |
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