1. whether there are taxes or not depends upon how much you take out of the IRA and what other earned income you have for the year. It's all taxable income at ordinary income rates (not capital gains, which are lower).Hello:
I inherited an IRA BDA via Fidelity in August 2020 with an original value of $160,215. I made a withdrawal of $33,200 in December of 2022. Currently the account is at $178,534.00. It is split into the following funds:
FRGRX (Fidelity Blue Chip Growth): 54% of the account - $96,581
FPURX (Fidelity Puritan): 21.66% of the account - $38,673
FGRIX (Fidelity Growth and Income): 17.89% of the account - $31,946
FOSFX (Fidelity Overseas): 6.34% of the account - $11,314
My other assets are $7,000 in a ROTH IRA and around $5,000 in a money market. My total estimated earnings for this 2024 will be around $30,000-$40,000.
I am graduating from law school in May and have $95,000.00 in student loan debt (undergraduate and graduate) and $20,000.00 in family debt that I owe to my parents. I want to pay all my debt off immediately, before it starts accruing interest.
Should I sell $115,000.00 and transfer it out of my IRA BDA to pay this off? Will there be tax consequences for selling it and transferring it out all at once, or is that advisable? Also, will there be additional taxes beyond the automatic withholdings Fidelity makes?
Please help, what should I do? Thank you very much.
2. So we can't tell you how much tax you'll owe unless we also know how much other income you'll have from earnings for the rest of the year (assuming you're graduating then working so you'll have earned income in addition to this withdrawal of IRA). You have to run the numbers on a calculator like this: https://www.mortgagecalculator.org/calc ... ulator.php
3. assuming you're single, using that calculator it show $17,676 in taxes owed on the $115,000 withdrawn. But you can see $115,000 - standard deduction of $13,850 leaves $101,150 which puts you in the 24% bracket. The top of the 24% bracket is $182,100 (that's in addition to the $13,850 standard deduction). So that leaves $80,950. If you're going to make more than that the rest of the year as a lawyer (minus health insurance premiums and any 401k contributions to pretax) then you'll be in the 32% bracket this year. But maybe you won't earn that much because you'll only be working for around 1/2 the year?
4. So it's hard to know without knowing what other income you'll have. The taxes fidelity is withholding may be a flat amount like 10% or 20%. You can see even without looking at other income and they don't know what bracket you're in so how can they know how much tax to withhold? But you can see $17,676 tax out of $115,000 is around 15% tax, so you could tell them to withhold that amount.
5. Of course, you see if you sell $115,000 and pay $17,676 in taxes, that leaves you with $97,324 and that may not be enough to pay the total debts. But maybe you can pay the $95k off and pay the other $20k out of your future earnings? Is your family charging interest too or just the other loan?
6. Sorry for your loss, by the way. Also did the person who died die in 2019 or 2020? It matters. The stretch IRA stopped for people who died in 2020 I believe. So there may be different rules depending on when this person died. If in 2020, you have until 12/31/2030 to deplete the account I believe. You should have a plan for the rest in the IRA since there will be $63,534 left after you take out $115,000.
Statistics: Posted by arcticpineapplecorp. — Sat Mar 23, 2024 9:13 pm — Replies 2 — Views 105