I’m working on a retirement withdrawal plan fir the future. If H and I withdraw say $50,000, his is that taxed? I think it’s the first $10 k at 10%, next 12k another %, etc, until it reaches the point where the remainder is at the tax would be in?
Is that correct? Or does the whole amount get taxed at the bracket we are in?
I think the amount gets taxed at the bracket you are in. I also think it could put you into a higher bracket, and then you would pay extra tax on the amount that’s within that higher bracket.
Ordinarily, hit 401k or other taxable qualified plan withdrawal would be added to your other taxable income and that total would be subject as a whole to taxation tables and formulas as a whole with a possible additional 10% tax on the plan withdrawal if you are under age 59 1/2 (there are exceptions).
But these are not ordinary times. For 2020, if your financial or health situation is affected by COVID19, there are some provisions. 1) The 10% extra tax is waived. 2) You can elect to have the distribution taxed over 3 years instead on one 3) You can return the amount to your 401k, as you would with a rollover within 3 years and get credited for any taxes you paid on the distribution in prior years. There is a $100k max regarding this and usual withholdings are waived.
Do research these provisions and the ramifications of them carefully and thoroughly with qualified financial and tax advisors.
How college’ financial aid policies will treat this , I do not know.
Thanks guys, so it’s taxed in total. Appreciate it.
I believe there is also a —under CARES act, just for 2020 you don’t HAVE to take your 41k or IRA distributions that you normally would take. I am unsure on details, so check if you’re interested.
H’s retirement distributions (both IRA and 403) are always just part of his income.
Keep in mind that you have to do forced withdrawals beginning at age 72.
While I think it’s not common yet, post tax contributions (ROTH 401k) and earnings, when withdrawn would not be taxed, affect social security income limits, nor subject to RMD rules. (Original owner)