Mother's ira

[connie333]

What is the name of your state (only U.S. law)? PENNSYLVANIA

My mother is 79 and has about $53K in her Vanguard IRA account. Can she cash that in and take the full amount or is there a penalty? If she can't cash it in, how much can she take out each year without penalty?

[anteater]

Since she is past 59-1/2 tears of age, there would be no income tax penalty if she withdraws it all. However, assuming that there were no non-deductible contributions to the IRA, the entire amount would be subject to income tax in the year withdrawn. That could push her into a higher income tax bracket in the year withdrawn and result in overall higher income tax than if she withdrew it over several years in smaller chunks.

(She has been taking the annual required minimum distributions, hasn't she?)

Just a note that may not be applicable... If she is considering this to gift this to you and your siblings, remember that, if she should need to apply for Medicaid assistance, there is a 5 year lookback period for asset transfers. Gifts made within that lookback period could result in a period of disqualification for Medicaid.

[connie333]

How about I just hire YOU to come to our family meeting so you can share your expertise with us? YOU ARE PHENOMNEAL!!! THANKS from the bottom of our hearts---AGAIN!!!

[anteater]

No problem.

I should also add... If your mother's income is pretty low, her social security payments are probably not subject to income tax. In quick terms: if all other income plus 1/2 of social security is less than $25,000 - assuming she is single - then no taxation of social security. If greater than $25,000, then a portion of social security benefits is subject to income tax. The greater the amount over $25,000, the higher the portion of SS subject to tax, up to a max of 85% of the SS benefits.

A $50K distribution from an IRA in one year would not only push her into a higher tax bracket, but also result in some percentage of social security being taxable.