I agree with Sailor Bob... > Take out a HELC  loan

and It's good to always have a LOC on one for the future.. for short  term /emergency needs..

I also have 3 credit cards, 6.75, 7 & 8% rates with $15k LOC's on them and at the stand by to use them... I charge my gas , food and other monthly items on them, pay them off monthy ot keep them active and in good standing..

and keeps me from havng to sell in a down market, besides the tax implicatons..

Bob,

I'm familiar with "The Last Lecture" .  I said we wouldn't cut down on travel and it's just for those kind of reasons.  Twenty years ago I had a cancer which has a less than 1 year survival rate.  Forty years ago, I was diagnosed with something and that prognosis was about 5 years.  I still don't know why G-d wants me here but we sure know about living for today.

I fully agree with you'all about the HELOC.  It's not an acceptable solution in this house.  Period.  End of subject.  Not negotiable.  We're going to be buying a new house in the next few years.  I floated taking a mortgage and putting the amount from this house to cover the mortgage in CD's for the tax aspects.  It didn't fly.

So we're back to which account. 

Roberta 

meyerr:

 I still don't know why G-d wants me here but we sure know about living for today.

 

Maybe it's so you can continue share your knowledge.

-frequent reader, infrequent poster,  i still have a lot to learn so stay healthy

Thanks John.

Roberta 

Hi Roberta,

You are one of the most knowledgeable posters on these boards, so it's pretty hard to offer you an opinion. What would you tell someone else who asked this question?

If I understand this correctly, you are making a one time withdrawal of less than half percent?  I don't know if it's really going to make much difference, but I guess I'd go with taxable. If you withdraw from the IRA, you will also have to have your custodian withhold taxes and you won't get that back for a year. If you don't withhold you could end up doing quarterly estimates.

And remember, money is not a collectible.

Paul 

Roberta:  Yeah, I know.... you guys have written the book on some conservative elements in risk taking....  Therefore, I will agree with Paul.... YOU might as well get the benefit of the capital gains tax break rather than the inheritors....  and I say that whether Paul is right in the amount (less than 1/2%) or not.....  it is YOUR money, you know... why should YOU pay more to Uncle Sam so someday an inheritor will benefit?  and this comes from a guy who very much wants my kids and grand kids to inherit from us... all the while taking some of those nice trips, too...

PAUL:  You said above: 

If you withdraw from the IRA, you will also have to have your custodian withhold taxes and you won't get that back for a year. If you don't withhold you could end up doing quarterly estimates.       

 I have never paid estimated taxes since I began withdrawing from my IRA..... In the past I usually withheld 10% for the fed tax and made sure I paid in as much as last year's tax bill to avoid any penalties.  This year I was planning to do somewhat the same except I would pay a larger chunk of the tax bill toward the end of the year. My understanding was (is?) that this kind of withholding from IRA distributions is considered as having been paid in throughout the year thus avoiding the necessity of estimated taxes. I hope someone can point me to the chapter and verse in the IRS Regs concerning this...

Peace

Bob

Paul,  Thank you for your kind words.  Bob, I understand the same about IRA distributions being deemed as happening throughout the year.

  We are already paying estimated taxes.  I have calculated the safe harbor and am giving the IRS that amount knowing that the amount of income increase we will eventually have this year means that I will again owe the IRS a lot of money next year but no penalty.  I will need to revisit this issue in the fall when the cash flow resumes to make sure I'm covered in terms of quarters and income.  I always try to do what's right in our eyes when it comes to money. The inheritors live in states with state income taxes so that there would be a bigger bill but I never let the tax tail wag the investment dog.  I just can't help looking at this stuff and thinking what's going to give me the best bottom line.

Bob, I couldn't find chapter and verse on the question you asked.  I know you don't have to pay taxes until you receive the income and can use the annualized method which is partly what I'm doing b/c you can be penalized if you pay the 100% of taxes owed as estimated taxes but didn't cover all the income in a quarter.  I've heard the same thing you did about it being deemed as paid throughout the year but wonder if these individuals are just taking out the money for next year in a lump sum at the end of the year and taking advantage of the fact that you don't have to pay until your receive the money rather than an actual rule that it's considered the same as withholding and having come throughout the year.  I don't know.

In terms of my current problem, Dennis and you may have given me a possible solution with your HELOC advice.  Since the time period is so limited, maybe/probably being resolved by June or certainly by July, I'm considering just writing the checks on the investment account margin and paying the interest.  The interest cost may be less than costs any other way and my husband doesn't consider that debt in the way he does a HELOC or credit card debt.  I have to play with those numbers.

Roberta 

Roberta,

My vote is, as your probably guessed, HELOC (or margin account, keeping Sam happy!)  That would probably be the most tax efficient way to go.

If not, I would go with both conventional wisdom, and your gut, and take it out of taxable.  The reason is quite simple, and that's simplicity.

As long as you have taxable monies, you have to worry about tax issues, in the sense of short versus long term capital gains and losses, qualified, versus non-qualified, dividend issues, tax efficiency, ad neaseum.  If you spend your taxable account down to nothing, then all of that goes away.  Monies taken out  of your tax deferred accounts are taxed at regular rates, monies taken out of your Roth are not.