The Real Tax Effect of IRA Distributions

Abstract

This abstract was created post-production by the JFI Editorial Board.

The purpose of this paper is to compare and analyze the "real" tax effect of Traditional IRA distributions. This paper demonstrates that an often overlooked but extremely important consideration is the impact that income from an IRA will have on the taxation of Social Security (SS) benefits. The paper begins with a cursory review of the current rules for distributions and taxation of traditional IRAs to the account owner. There are several variables that affect the taxation of an IRA distribution, and the variables are reviewed using different scenarios to identify potential misconceptions and to identify planning opportunities that may be available. The paper concludes with a discussion of how the results may be applied by practitioners in financial planning and estate planning.