How Much Tax Do I Pay on an IRA Withdrawal After Retirement?

Withdrawals from an IRA are typically taxable; however, there may be exceptions such as taking money out to cover unreimbursed medical costs or making your first home purchase.

Calculating the taxable portion of an IRA withdrawal can be complex, but with some work you can quickly get to grips with how it all works.


No matter whether your savings are in a traditional, SEP, SIMPLE, or Roth IRA account, contributions made before taxes are deducted are considered pre-tax contributions for 2023. Individual account maximum annual contribution limit for individual accounts in 2023 is $6,000. Your ability to deduct workplace retirement plan contributions (such as 401(k) plans) depends on income and filing status.

If your traditional IRA contains nondeductible contributions, any withdrawals are taxable. To determine this portion, create a fraction with its numerator equaling your cumulative nondeductible contributions and its denominator equaling all your IRA values at year’s end plus any withdrawals; multiply this fraction with the life expectancy factor from the IRS Uniform Lifetime Table in order to calculate RMDs; it is wise to stagger withdrawals over several years so as to avoid withdrawing more than necessary.


Individual Retirement Accounts (IRAs) offer tax advantages when saving for retirement. The Internal Revenue Service allows both individuals and employers to contribute up to the annual maximum, depending on the type of IRA. A Traditional IRA, Simplified Employee Pension IRA or Savings Incentive Match Plan for Employees IRA allows contributions made with pre-tax dollars while earnings and withdrawals will be taxed as income.

Roth IRAs differ in that withdrawals after age 59 1/2 are generally penalty- and tax-free, although any withdrawal before that age may incur income taxes and sometimes an early withdrawal penalty of 10%; exceptions exist, however, such as paying medical expenses or purchasing your first home.

When withdrawing money from an IRA, the IRS will send you an IRS Form 1099-R that details how much was distributed as well as any applicable taxes. Carefully consider this report, particularly if you hold multiple IRA accounts.

Required minimum distributions

RMDs (required minimum distributions) are annual withdrawals that must be taken from certain tax-deferred retirement accounts, such as traditional and SEP IRAs, SIMPLE IRAs and employer retirement plans, when reaching age 72 (or age 73 after Dec 31, 2022). RMDs are taxed as ordinary income.

Withdrawals made prior to turning 59 1/2 are subject to an additional 10 percent penalty in addition to regular income taxes. Your account custodian should notify you of your Required Minimum Distribution or you can calculate it using IRS worksheets that account for annual changes in life expectancy tables.

Calculating an RMD involves dividing your prior year-end retirement account balance by the applicable life expectancy factor found in the IRS Uniform Lifetime Tables and taking withdrawals gradually over several years in order to minimize sudden dips in income. Failing to take out this minimum required amount could incur a 50% penalty fee.


An IRA is an individual retirement account (IRA), providing tax-advantaged investments. Your contributions may be tax-deductible and your earnings grow tax-deferred until retirement when they’re ready for withdrawal. Additional taxes may apply if you miss your required minimum distributions (RMDs) or take distributions prior to reaching certain age thresholds.

Money withdrawn from an IRA prior to reaching its set age (usually age 59 1/2) must generally be reported as income and subject to a 10% penalty; however, there may be exceptions such as withdrawals made for qualifying expenses such as medical bills, education costs, first-time home purchases or birth/adoption of children.

Withdrawals from an inherited IRA must typically be reported as ordinary income and may be subject to the 10% early withdrawal penalty unless an exception applies. Taxes on distributions may be paid through withholding, quarterly estimated payments, or calculations on an individual’s return.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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