If my traditional IRA is fully invested in a tax free bond fund, and I am receiving a distribution of the monthly dividends, do these distributions count toward the required minimum distribution, and do I have to pay taxes on them?

If my traditional IRA is fully invested in a tax free bond fund, and I am receiving a distribution of the monthly dividends, do these distributions count toward the required minimum distribution, and do I have to pay taxes on them?

Investing, Bonds / Fixed Income, IRAs, Taxes
Answers
Sort By:
Most Helpful
April 2018

If you are taking distributions from your traditional IRA then yes, you would have to pay taxes on them regardless of whether you are over the age of 59.5 when you are able to take funds out of your IRA without any early withdrawal penalties or over the age of 70.5 and are required to take your required minimum distributions.

On another note, having a tax free bond fund invested within your traditional IRA is not advantageous since tax free bonds interest is tax free. This means that you do not pay taxes on the interest, therefore more appropriate for a nonretirement account. Whereas with RMDs you are paying taxes on the funds taken out since contributions would have given you a deduction and are pretax dollars.

April 2018
April 2018
April 2018
April 2018