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Dear Liz: I am 74 and retired. Due to the economy I would like to cash out my retirement accounts. I have an individual retirement account, a Simple IRA and an annuity. Only other income is Social Security. How badly would this affect me?

Answer: That depends. How much do you love paying unnecessary taxes?

Cashing out any retirement account, other than a Roth IRA, typically triggers a significant income tax bill. Cashing in an annuity may also trigger surrender charges that can be substantial.

If you took too much risk with your investments, you can shift to safer options inside your retirement accounts. You would be smart to consult a fee-only financial planner first, so you can construct a portfolio that acknowledges your tolerance for risk while still giving you enough money to live on for the rest of your life.

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Categories : Q&A, Retirement, Taxes