Community Forums

cc8375 · 03-29-2014, 01:30 PM

Quote:

Originally Posted by Superslif

As far as a withdrawal from a IRA, is there a difference between a withdrawal from a Roth IRA, 401-K or a traditional IRA. Roth additions are "after tax" monies. Your Traditional IRA is pre-taxed monies. I was under the assumption Roth IRA's withdrawals you didn't pay income taxes on after age 59-1/2)?

401-K's and traditional IRA's you paid income taxes on after the age of 59-1/2.

I have funds in all three, but my issue is I plan to retire at 53 or 54, so I'll have a small funding gap for 5 or 6 years, until I can withdrawal from any of these three if needed.

You can take Withdraws Before age 59-1/2 under the 72T Rule. Talk to you Financial Planner or Accountant. (note, Some Accountants are not familiar with this rule)

Rule 72(t) Definition | Investopedia

38Chevy454 · 03-29-2014, 01:42 PM

As many have said, any withdrawal from the pre-tax account will be considered as income and tax liability going with it. You said you have some after-tax money to use, and wish to remain debt-free, so that would be your best choice. If you do run short of money, you can withdraw some of the pre-tax assets.

FIRE UP · 03-29-2014, 08:58 PM

To the OP here,
Well, as you can see, you're getting an array of answers here. I'll shoot you one more. We're in the process of purchasing a home in Havasu AZ and, because the buyers or our present home backed out, we will go beyond the normal closing date that was intended. So, we were pursuing alternative ways of procuring money to purchase our new home, while waiting to sell ours.

I thought about using the IRA to do so. Well, I shot an email to our financial planner of our IRA and, asked what the story was/is on using our money before 70 1/2. Well, I'm 61 1/2 so, there's no penalty for early withdrawal but, as others have stated, it really doesn't matter what you pull if out for, the IRS calls is, "INCOME". And, you get taxed on income, period.

But, she also told me that, I could pull out all the money in the IRA if I wanted to use as I please, and not get taxed on it, IF, and this is the BIG IF, you put it back within 60 days. If you don't, the IRS calls it a "TAXABLE EVENT".

So, you say your adamant about not going into debt for this intended coach. Well, if you've got "other money" other than your IRA, then it sounds like you've got it covered.
Scott

TexasTom · 03-29-2014, 09:06 PM

If you can find a custodian that will work with you, then you CAN use your IRA to purchase a MH. I have seen it done. Shoot me a pm and on Monday i will see if i still have the contacts

wa8yxm · 03-30-2014, 05:18 AM

Though laws may vary from state to state and I do not know if the law here is state or federal but you may start drawing from MOST IRA type accounts (It may depend in the account) at 59 1/2.

You are both older than that.

So in your case the ansewr is likely yes.. Speak with your IRA adviser.

In my life one of the thigns I tried was selling Life Insurance,, Turns out I'm no good at it.. But in getting the license I had to learn IRA rules and regulations.

MoHoGo · 03-30-2014, 06:03 AM

Any chance you have a Roth IRA, if so no hit on taxes when you withdraw.

wnytaxman · 03-30-2014, 08:19 AM

Quote:

Originally Posted by TexasTom

If you can find a custodian that will work with you, then you CAN use your IRA to purchase a MH. I have seen it done. Shoot me a pm and on Monday i will see if i still have the contacts

With all due respect, just because someone else did it and got away with is no indication that it would work. To invest in anything that is outside of the realm of normal investments requires an independent IRA custodian. That custodian is bound to make "prudent" investments. It's called the reasonable man rule. A motorhome is not an investment, as I'm sure almost all on here would agree, and as such, it would leave the custodian liable for the losses incurred on that investment.

We have one client who invests in self directed rental properties with his IRA through an independent custodian. The rules on that type of investment are very, very strict. The IRA has been audited and it has been determined that our client is in compliance. I would be willing to bet that "investing" in a motorhome would be shot down pretty darn quickly.

greystroke · 03-30-2014, 09:41 AM

I think this has been mentioned but this is so important if you are on Social Security.

You pay taxes on Social Security up to 85% of SS income. The tax bill for SS is based on a formula for your total income, SS plus, retirement, W2, IRA withdrawals etc.

So before you reach 85% Tax on withdrawals is taxed twice. Once for SS and once for the normal tax bracket. For example, lets withdraw 5000. So approx. 10% or this amount will be taxed in the SS tax formula ($500). Then you have to tax in the bracket your in. Maybe 15% so another 750 for that. Total tax on the withdrawal is about 25%. (depends on the formula)

After you reach the 85% you stay just in the 15 tax bracket for quite a while so try to withdraw as much as possible is this bracket.

Just a thought. People that have accountants do their taxes may never know this.

TexasTom · 03-30-2014, 07:09 PM

Quote:

Originally Posted by wnytaxman

With all due respect, just because someone else did it and got away with is no indication that it would work. To invest in anything that is outside of the realm of normal investments requires an independent IRA custodian. That custodian is bound to make "prudent" investments. It's called the reasonable man rule. A motorhome is not an investment, as I'm sure almost all on here would agree, and as such, it would leave the custodian liable for the losses incurred on that investment.

We have one client who invests in self directed rental properties with his IRA through an independent custodian. The rules on that type of investment are very, very strict. The IRA has been audited and it has been determined that our client is in compliance. I would be willing to bet that "investing" in a motorhome would be shot down pretty darn quickly.

Thanks for your humorous response! We had a great chuckle over it!

wnytaxman · 03-31-2014, 12:38 PM

Quote:

Originally Posted by TexasTom

Thanks for your humorous response! We had a great chuckle over it!

I'm glad you got a chuckle out of my comment, but the fact remains that IRA's are not allowed to be self-dealing which includes purchasing property which you or any family members will be living in. This idea has been tried and knocked out in court.

JACKAL0PE · 04-02-2014, 07:45 PM

Well, you say you won't borrow the money, but I have to tell you that borrowing is probably the best thing to do. I actually ran the numbers with my CPA and it wasn't even close. The interest on the loan just killed the taxes. Reason being, as someone else said above, you only pay the increased bracket on the money in that bracket. So if you're normally at the top of the 28% bracket and pull out let's say $70k for the rv, ALL that is in the higher bracket. Remember, you've got to figure the tax penalty on top of your regular Ira income.

CoCoDave · 04-04-2014, 08:07 PM

OK, I surrender. We're borrowing the money. Our financial guy rendered an opinion similar to some of the responses in this thread. My posts here were hyper-emphatic about not borrowing money because I wanted to focus the discussion on finding a straightforward, legal way to use IRA money without causing it to be classified as income. As stated in the original post, my understanding was, and remains, that such a maneuver is not viable.

That said, we have decided to borrow at 4.49% while leaving the non-IRA money invested earning 5+% which has been its actual return over the last couple of years. Pensions kicking in and mandatory IRA distributions beginning next year will make this tax deduction a relative good thing.

I don't like forfeiting debt free status, but when DW said of the coach "it spoke to me", the debate was over.

Thanks for taking the time to respond.

Happycarz · 04-04-2014, 09:38 PM

OK, Dave, now that you have the financial part figure out, what coach are you buying? You barely have your Windsor broken in. Someone will be getting a nice coach.

Your sign in name was DipDave, then WindsorDave, now will it be DynastyDave?

JACKAL0PE · 04-05-2014, 03:55 AM

Dave, believe me buddy, I know how you feel. I argued with both my CPA and my financial planner for a couple of days that getting a loan was just nuts. But in the end, I just couldn't argue with the spreadsheet. I hate it too, but we have to live in the world the US government and our politicians have made.

Happy trails!