Category: Business and Money > Consulting
Asked by: regino-ga
List Price: $20.00
09 Nov 2006 11:21 PST
Expires: 09 Dec 2006 11:21 PST
Question ID: 781413
Hello I am a retired senior citizen with a rather large traditional IRA. The money is currently invested in the stock market and I am wondering if I can use that money to buy a fishing lodge or an apartment complex or some other income producing property and not have to pay tax in the process. Or put another way, is there any way of avoiding and/or minimizing the amount of tax that will have to be paid whenever I begin to withdraw money from the IRA at age 72 & 1/2. Someone told me I could convert it into a Roth IRA and after three years it would be tax free. Is this correct?
Re: IRA Question
Answered By: sublime1-ga on 09 Nov 2006 16:05 PST
regino... Thanks very much for confirming my response as a suitable (if unwelcome) answer. I'll repost it here for the sake of future readers. --------------------------------------------------------- This page of IRA FAQs from Firsttrade seems to cover your interests. First of all, you mention beginning to withdraw from your IRA at the age of 72 & 1/2, but this sections states: "The law requires IRA owners to start taking distributions from their account by age 70 1/2. Failure to withdraw the required amount will result in a penalty of up to 50% the required withdrawal. One solution is to convert the Traditional IRA into a Roth IRA (after paying taxes on income), which is not subject to mandatory withdrawals." http://public.firstrade.com/public/support/faqs/faqsira/#eleven "The Roth IRA was first introduced in 1998, quickly gaining popularity as the new retirement planning investment vehicle. The main difference between the Roth IRA and the Traditional IRA is that contributions to a Roth IRA are not tax deductible and therefore come from after-tax income. However, the income generated by the Roth IRA is tax-free upon qualified withdrawal. In other words, traditional IRAs offer tax deferral while Roth IRA earnings are tax-exempt." http://public.firstrade.com/public/support/faqs/faqsira/#six However, conversion has its price: "You can easily convert a Traditional IRA into a Roth IRA without any penalties. However, deferred taxes on the Traditional IRA must be paid upon conversion." http://public.firstrade.com/public/support/faqs/faqsira/#seven More on the page: http://public.firstrade.com/public/support/faqs/faqsira/ --------------------------------------------------------- Best regards... sublime1-ga Searches done, via Google: "withdraw from an ira" "tax free" ://www.google.com/search?q=%22withdraw+from+an+ira%22+%22tax+free%22
rated this answer:
and gave an additional tip of:
Thanks again for your fine work.
Re: IRA Question
From: daniel2d-ga on 09 Nov 2006 14:57 PST
There is no way to avoid taxes on your traditional IRA. You can covert (assuming you meet the requirements) to a Roth IRA but that means paying tax on the converted funds at the time of conversion. You seem to think that real estate assets will somehow shelter your IRA from taxes - that is not correct. Plus you will have all the risk that goes along with real estate If you think real estate is a better investment than stocks you an invest in a REIT. Your IRA custodian should be able to provide information on the various investments available.
Re: IRA Question
From: sublime1-ga on 09 Nov 2006 23:01 PST
regino... Thank you very much for the 5 stars and the tip. Happy retirement! sublime1-ga
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