TAX IMPLICATIONS FROM EARLY RETIREMENT WITHDRAW

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Contributor

I currently live in Chicago and am earing 330k per year. I am taking a job that will get my wife and me back to Florida. The new job pays 200K which puts me in a lower tax bracket. I'm over 591/2. I will be withdrawing 150k from either tradional IRA or 401k as a downpayment on a new home in Florida. The questions are: If I'm using the funds for a primary residence in Florida, do I need to actually move there first to make the withdraw? We are renting in Illinois and don't own any other property. And do I wait until my new salary starts since it's much lower.. to make the withdraw? What is the best way to accomplish this paying the least amount of taxes???

2 REPLIES

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Dear Theotherwoman,

I encourage you to contact our team of Financial Advisors here at USAA who can give you advice based on your specific situation and needs. They can be reached at 800-771-9960! Thank you for posting and best of luck with your move back to Florida!

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OK just so you'll know I am a 45 year member of USAA and yes they have slipped over the past decade or so ................. So when USAA fails to respond. as I presume they will....... there's NO money for them to make giving you financial/tax advice........................... I am presently an Agent Enrolled to practice before the IRS so I have some idea what you're attempting to do ..........As an EA here in Florida I do seem to remember an exception to withdrawing funds from an IRA for a first time home buyer. Check with your Trustee of the IRA........ IF they are comfortable issuing the Form 1099R as NO penalty applies...... then you are tax free ........if not, then you will avoid the 10% early withdrawal penalty (Under 59 1/2) but have to pay regular tax on the whole withdrawal. combined with your other taxable income..............SALARY..... By doing the withdrawal in the year you move to Florida, your moving expenses and lowered salary should help with your Federal tax burden. Good luck and do check with a Tax Professional BEFORE you touch any money