FINANCIAL NEWS & VIEWSBy Alan S. Moore / L’Observateur / December 9, 1998Q: With a Traditional IRA, when you are eligible at age 59 1/2, can you withdraw the entire amount in a lump sum? A: Yes; however, you should consider your financial situation carefully before taking a lump sum distribution from your Traditional IRA. Here’swhy… Because Traditional IRA investments are tax-deferred, you owe income tax on that portion of your withdrawal(s) that is not attributable to non- deductible contributions. What’s more, for tax purposes, such withdrawalsare considered ordinary income. In other words, if your combined incomefor the year puts you in the 28 percent tax bracket, that’s the rate at which the taxable portion of your payout(s) will be taxed. Of course, mostpeople assume they’ll be in a lower tax bracket when they retire.
Unfortunately, this isn’t always the case.