Tax consequences of liquidating ira

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Roth IRAs do not receive the upfront tax break that other retirement accounts, such as Traditional IRAs and 401(k) plans, receive.

With these plans, technically known as pre-tax retirement accounts, your contributions—the money you deposit, up to the limit allowed—lower the amount of your gross income that is subject to taxes, thus effectively lowering the amount of tax you owe, in the year you make them.

In contrast, Roth IRA contributions are made with after-tax dollars.That is, they don’t reduce the amount of your gross income, or your tax bill, the year you make them.The tax benefit you get comes at retirement, when you don’t owe any income tax on the money you withdraw from your Roth IRA—because you already effectively paid it, back when you made the contribution.Joe welcomes your questions or comments at [email protected] visit our website at Secured Follow us on Twitter @joe_lucey or Like us on Facebook.Since the creation of the 401(k) and other employer-sponsored retirement plans, most advisers and investors have focused on how to get money into them — not necessarily how to best take money out of them.

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