- I currently have $5045.00 from a contribution I made to a regular IRA in 2008. - I plan on contributing $5000.00 - the limit - for 2009.
Therefore, in total, I would have at least $10,045 sitting in a regular IRA account.
I plan on not working 2010 - 2012 to go to school to get my master's degree.
I plan on taking a distribution (getting my money out my IRA account) during those years to pay for "qualified educational expenses." I understand that, if I use the money to pay for qualified educational expense, I'm exempt from a 10% penalty. I'm also understanding that I will not be paying any tax on the full $10,045 ,if I take the distribution during my unemployed years, since the amount is too low to be taxed anyway. Please let me know if my understanding of the tax issue is correct before I fund my account for the 2009 tax year.
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posted: Sep. 30, 2009 @ 5:00p
mogg
Cranky Member
posted: Sep. 30, 2009 @ 6:38p
Yes, this sounds about right. The standard deduction for single filers will be $5,350. Assuming you are single, you may want to withdraw $5,350 in 2010 and the rest in 2011 to avoid taxes completely
If your qualified higher education expenses are higher than your IRA distribution during the year, the IRA distribution won't be subject to the 10% additional tax.
Also, assuming you are single, have no dependents nor a dependent yourself, will not itemize, have no other taxable income during the year and you don't withdraw more than the sum of the current year's standard deduction and personal exemption (should be about $9K?), you will pay no federal taxes on the IRA distribution.
Iwanttoberich23
New Member
posted: Sep. 30, 2009 @ 6:49p
Thank you guys for your help! Had I known several years ago, I wish I could have contributed the (2004 - 2007) previous years! Thanks again for your help!
mlayu
Senior Member
posted: Sep. 30, 2009 @ 9:55p
I wish I had known FWF before I went to school.
LH2004
Frivolous Member
posted: Oct. 1, 2009 @ 12:43a
If you can afford it, you would be better off converting to a Roth IRA during your low-income years. Future growth of the $10,000 would then be tax-free.
2stepsbehind
Senior Member
posted: Oct. 1, 2009 @ 1:03a
If you want to be rich you probably should leave your retirement savings alone and find another way to pay for grad school i.e. scholarship, TA/RA positions, tuition reiumbursement from your employer, work part/full time etc.
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