I am 69 yrs old, with a diagnosis of stage 4 melanoma. My wife died in 2021 of lymphoma. My income currently is only Social Security, i have not taken any disbursements from the IRA
Rumors around the senior center here say i should be able to draw some, if not all of an amount equal to or less than that i get from Social Security without penalty or taxation.
Is this true? Or do you recommend a more effective strategy?
I am so sorry to hear all that you are going through. My condolences on the loss of your wife, and your diagnosis. My thoughts are with you as you go through all this including the rumors. I hope you find this helpful in putting those rumors into context.
So the first thing here is you can withdraw as much as you need from the Simple IRA as you need, since you are over the age of 59.5. The question is what are the tax consequences.
So, the concept here is "combined income". Combined Income is your adjusted gross income plus nontaxable interest and half of your Social Security benefits for the year.
So the question of how much can be withdrawn from the Simple IRA and your Social Security not being taxable depends upon how much half your Social Security benefits are. For example, lets say your yearly Social Security benefits are $25,000 and you are single. You could distribute $12,499 from the Simple IRA and none of your Social Security benefits would be considered income. Since the $12,499 withdrawn from the Simple IRA is below the standard deduction of $16,550 for filing as Single and being 65 and older you would not pay any tax.
Thanks again for the question @dillybills and please know that I am sending you all the good thoughts I can now.
All the best,
Marc
Employee Tax Expert