Orange County California

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Taking Your IRA Benefits over a Five Year Distribution- Explained by Orange County Estate Planning Attorney James F. Roberts

What Benefits Does Taking A Five Year Distribution on an IRA Have?

Rather than taking a lump sum, a possible better option for a beneficiary of an IRA or 401k would be to take it over five year distribution. There are benefits for using the five year distribution including stretching out the tax payments, maintaining a lower tax bracket, and allowing what is still held in the IRA each year to continue to grow tax deferred.

So let’s say for example, a beneficiary has $300k coming to them. Over a five year distribution, they are taking out $60k a year, which lets them stay in a lower tax bracket annually and they have stretched out the paying of the tax over 5 years. The part they do not take out continues to grow tax deferred during that time. At the end of 5 years, it is no longer an IRA and they have had to pay the tax on the full amount. Learn more about what types of distributions you can take from an IRA by watching more of our videos on the subject or by contacting our office and meeting with an attorney.

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