For a little more explanation. As I said, I get to keep only 11 cents out of each dollar of the MRD. But my marginal tax rate is
about 28% on the federal and 6% on the New York state. I arrive at that figure by increasing my MRD by $100 and seeing that my taxes go up by $28 on the federal and $6 on NY State.
As for why so much of my MRD goes to taxes.
(1) I have very little taxable income.
Total Federal taxes is less then $300.
[I have 5 more points to make but yahoo is limiting me
No, it is not true that 89% of your IRA distribution goes to the government. You are adding the tax rates for your SS benefits and your investments to the tax rate you pay on the IRA. Now that you are taking IRA distributions, the other sources of income are now taxed. Your IRA is taxed at your regular rate, as you indicate, 28% federal. You can’t do anything about the tax on SS benefits if you take traditional IRA distributions. You can start investing in muni bonds. You can gradually move some of this IRA to a Roth, which…
gh taxed when you move it, it will decrease the required distribution from the traditional IRA in future years. You will never have to take money out of the Roth, but if you do, it will be tax free after five years, and tax-free to your heirs. If you manage to move all of the IRA to a Roth, then your Roth distributions will not trigger tax on the SS benefits.