Accepted Answer

Hello again graydove,

 

Since you are over the age of 59-1/2, then you will certainly not owe any early withdrawal penalty, as you are now entitled to take distributions without a penalty anytime that you choose to do so.

 

I assume that all of the contributions that you made to your 401K plan and your IRA were all on a pre-tax basis. If that is the case, then when you withdraw those funds they will be taxed at ordinary income tax rates. If you have no other income for this year, then your IRA and 401K withdrawals will be the only source of income you have which will be subject to tax. If you just retired recently and had earnings from earlier in the year, then those earnings would also need to be added to your withdrawal amounts to come up with your total taxable income for the year.

 

As I am sure you know, your tax will depend on just how much your earnings were (if any) and how much your withdrawals are going to be. The more money you earned and the more money you withdraw, the higher your tax bracket will be.

 

Once you figure what your total income will be for the year including your withdrawals from these retirement accounts, then deduct from that your standard deduction of $6,800 (since you are over 65 you are allowed a higher standard deduction) and also deduct $3,500 for one personal exemption. So you deduct a total of $10,300 from your total income and retirement withdrawals, and the balance is what will be taxed. Below are the tax rates for 2008 on whatever that adjusted gross income comes out to be.

 

10% on income between $0 and $8,025

15% on the income between $8,025 and $32,550; plus $802.50

25% on the income between $32,550 and $78,850; plus $4,481.25

28% on the income between $78,850 and $164,550; plus $16,056.25

33% on the income between $164,550 and $357,700; plus $40,052.25

35% on the income over $357,700; plus $103,791.75

 

If this was helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank you and let me know if you need more help in figuring this and I will be happy to help you.

 

Expert:	Merlo
Pos. Feedback:	99.8 %
Accepts:
Answered:	8/30/2008

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad