When you withdraw money from an IRA account, the amount you withdraw is added to any other income you have for the year from other sources. So this would include wages that the other spouse may still earn, interest, dividends
, retirement pension, etc. It is then your overall total income for the year, including that IRA withdrawal, which will determine the tax bracket you are in and the percent of tax you would pay.
Because of our graduated tax system, the more you take from the IRA account in any one year, the more tax you will end up paying, and if the withdrawals are high enough, they could end up throwing you in to the next highest tax bracket which is what you want to try to avoid. Below are the tax brackets for 2009. This is based on taxable income
after your allowed deductions
for a married couple:
10% on the income between $0 and $16,700
15% on the income between $16,700 and $67,900; plus $1,670
25% on the income between $67,900 and $137,050; plus $9,350
28% on the income between $137,050 and $208,850; plus $26,637.50
What you should do is figure up what your total taxable income will be for 2010 without any IRA withdrawals. If that figure for example comes up to $50,000, then by using the brackets above you can see that withdrawing another $17,900 from the IRA would still keep you in the 15% tax bracket, so you would end up paying 15% tax on the IRA withdrawal. Any withdrawal over that amount jumps to the next highest tax rate of 25%.
Using these brackets to determine the amount you should withdraw each year will help you to keep your withdrawals within a reasonable tax range.
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