The Fribble
Monday, November 22, 1999

Testing, Testing

By Jacki Stirn (RecoveringFool)

Recently I've noticed that often someone will post a question with an example and instead of people posting responses to the question, they will post responses to the example. So at the end of the Fribble is a very short quiz.

Sometime last summer I was contemplating the state of our finances. I was actually considering a run through the taxes to see where we stand (yes, I am considered a tad strange here and there). In my contemplations, I came up with the fact that since I was not particularly gainfully employed at that point in time, this could be one of our lowest income years in quite a while and probably would be an outlier in the series (had to throw in a little statistical jargon). Retirement funds and I have had a love-hate relationship for a while. We have the retirement money pretty much taken care of but the Rocket Scientist has no plans to retire. Since his father's idea of retirement was to sell his company at about age 73 and then consult four days a week, I believe him.

The other issue on the retirement funds for me is that our traditional IRAs will be taxed as income when we get the money. I would far prefer this money in a taxable account and in stocks with low or no dividends so that I could control the gains and they would be capital gains, not income. Then it hit me! I'd better look at what will happen when we have to deal with that money. The RS will have to start taking distributions at 70 1/2. Hmm, the IRS uses life expectancy tables to determine required distributions. I can't remember if I found the Statistical Abstract of the U.S. online or if I was plain lazy and asked JABoa to look it up for me (the Stat Abstract is one of his favorite reference books).

When I did the calculations (yes, I did them myself but certainly could have posed the question at the Math board), I was one unhappy camper. We would be paying taxes in a higher bracket than our current one. Blech! I would never cheat on my taxes but I'm not paying more than necessary.

Problem: I'd really like to get the IRA money into a taxable account. Solution: SilverShoes was heading off to college in August. She has a really wonderful scholarship (Go, SS!) so this is the only year we will be paying her tuition. Aha! Use the IRA money to pay for college this year and keep the taxable money slated for college where it is. Final step: run it by TMF Pixy to see what I missed. Done. Researched. Evaluated. Decided. Acted.

Before I forget, here's the quiz:

The point of this Fribble was:

  1. You should use IRA money for college.
  2. Always carefully evaluate your financial situation.
  3. You can have too much retirement money.
  4. JABoa has strange reading tastes.

Feel free to post your response at the Fribbles message board.

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