Money you withdraw from an IRA may be taxed at a lower rate today than will be the case tomorrow. That’s because of the tax cuts passed into law in 2001 and 2003. Over the next few years, tax rates are scheduled to return to higher levels.
The possibility of higher rates in the future is especially important if you are over age 59 1/2. At that age, you can take money from your IRA without paying a 10 percent early withdrawal penalty.
If that’s the case, you should take out as much money as you can, in a 15 percent tax bracket. In 2004, you owe 15 percent to the IRS on up to $29,050 of taxable income, or $58,100 on a joint return.
Thus, if you file a joint return and you project this year’s taxable income at $50,000, withdraw $8,000 from your IRA to max out this tax bracket. In the future, you may not have the opportunity to take 15 percent IRA withdrawals.
