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Retirement tax questions
No, you are not doing anything wrong. When you withdraw money from a retirement account you are going to be taxed on that amount as income. You either withdraw more than you need to live on and save the remaining amount to pay your taxes or you withdraw the amount to pay your taxes once you have put together the information for your tax return.
For example say you with draw $50,000 to live on, assuming this is your only income and you are Single and taking the Standard Deduction, you taxable income is $38,000. The amount of tax you owe on $38,000 is $4,345. Now the challenge is if you take out another $5,000 for the taxes you also owe tax on that additional amount you took out. Since you have already reduced your income by the Standard Deduction, the additional amount you take out is going to be taxed at 22% for an additional tax of $1100.
So yes it does become a round robin.
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