Retiring at 62, IRA Questions

rtready · #1 (**permalink**) 04-13-2010, 04:14 PM

Hi, all: I'm looking for some retirement prep options.

I will be taking early retirement starting next Jan '11. I'll be 62 early in Jan '11 and will start colecting SS Feb 1(I assume). I'm single, no kids, no ex's

My current assets for retirement are:

1/3 long term stocks in regular brokerage account

2/3 IRA

also a small pension from a previous employer

I'll work into next year till I get to the $14k SS limit for earnings

My plan is to purchase immdeiate life annuities w/ my assets. I'm trying to determine the best timing for purchasing the annuities with regards to tax consequences.

-Do I need to cash-out the IRA account?
-Can I buy the annuity w/in the IRA and then withdraw $$ as needed
-Does any of this affect the $14 SS allowable earnings/year(w/o penalty).

Any advice/suggestions greatly appreciated

cafetax · #2 (**permalink**) 06-16-2010, 02:00 PM

- You dont need to cash out your IRA, you can buy annuities inside the IRA (although SPIAs are not a great vehicle with inflation on the horizon).
- Yes, see above. Your still limited to the liquidity of the vehicle inside the IRA.
-Any taxable distribution will be included in your SS inclusion formula to decide how much is taxable if any. You need to sit down with a CPA to project how much income you can take from your IRA without triggering SS tax.

-Joe

NJH_LFG · #3 (**permalink**) 07-07-2010, 04:11 PM

Do not purchase an annuity inside of your IRA! If you are looking for an annuity you should roll your IRA into it.

Fin.Guru · #4 (**permalink**) 08-09-2010, 12:28 PM

1. No you don't need to cash out of your IRA by doing a 1035 exchange.
2. You can get an annuity that is flexible, which allows you do do withdrawal.
3. You will have to go to CPA where you can divulge your income to them to find out what is taxable.

If you need anymore help let me know. I'm very knowledgeble with retirement.

kwkintx · #5 (**permalink**) 08-29-2010, 07:25 PM

Why are you set on annuities? You should look at all your options and NOT put all your eggs in one basket. I have heard too many stories about people buying annuities and then finding out they don't perform as promised or having very high fees. Before you purchase an annutity, have an attorney look over the contract to make sure you understand what it says EXACTLY. Yes, it will cost a few hundred dollars but it could save you thousands.

MoneyPro · #6 (**permalink**) 09-20-2010, 12:28 AM

Quote:

Originally Posted by rtready

Hi, all: I'm looking for some retirement prep options.

I will be taking early retirement starting next Jan '11. I'll be 62 early in Jan '11 and will start colecting SS Feb 1(I assume). I'm single, no kids, no ex's

My current assets for retirement are:

1/3 long term stocks in regular brokerage account

2/3 IRA

also a small pension from a previous employer

I'll work into next year till I get to the $14k SS limit for earnings

My plan is to purchase immdeiate life annuities w/ my assets. I'm trying to determine the best timing for purchasing the annuities with regards to tax consequences.

Whatever funds come out of your IRA to fund your income will be taxed as ordinary income regardless of the investment vehicle you choose. Therefore, if you use the IRA to purchase an immediate annuity, all of the income will be taxed.

However, if you use some of the non-IRA funds to purchase the immediate annuity, then a portion of the income will be taxed and a portion will be considered return of principal which will not be taxed.

-Do I need to cash-out the IRA account?

No, you can use the IRA funds to purchase an immediate annuity.

-Can I buy the annuity w/in the IRA and then withdraw $$ as needed

Yes.

-Does any of this affect the $14 SS allowable earnings/year(w/o penalty).

No. The $14K of income you are referring to is wage income only.

Any advice/suggestions greatly appreciated

There are a couple of other suggestions that may or may not be appropriate depending on various factors, primarily the size of your investment accounts, the amount of income you will be receiving and your tax bracket which will largely be determined by the previous.

1) Make sure to leave yourself plenty of extra cash for inflation since it is coming. There are immediate annuities that will pay you less at the beginning but adjust for inflation as you get older and it is worth looking into these annuities.

2) This suggestion will largely depend on how large your IRAs are but, if they are large enough, you may consider setting up a Charitable Remainder Trust (CRT). This will provide you with the income you are looking for along with an immediate tax deduction to help offset the income. And, since you are not married and don't have kids, the remaining balance of the trust, if any, goes to the charity upon your demise.

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