Ask Terry Questions avoiding taxes on mandatory distributions

avoiding taxes on mandatory distributions

By Terry Savage on May 30, 2019 | Financial Planning / Retirement

This summer my husband will start receiving distributions from an IRA and a 401k at this point we don’t need the extra cash where can we invest it to have the least tax to pay? Can it go into an existing Roth IRA?

Terry Says

Well, sorry to say that you must pay ordinary income taxes  on all distributions from your retirement accounts.  That money will be added on to your other income, and taxed at your marginal rate. (It could even move you into a higher tax rate bracket.)

Assuming your husband is still working an earning income, he could make a 2019 contribution to a Roth IRA with the money he has remaining after paying taxes.  But he can’t contribute to a traditional IRA after age 70-1/2.   Or you could just save it in a money market deposit account and earn interest on it outside a retirement account.

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