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Tax Incentive to Use a Roth in Retirement

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Q. Your article on Social Security benefits (RR, 6/26/06) raised some interesting points. I am 72 years old. From time to time, I take a small distribution from my Roth IRA. Does this count as provisional income for the tax on benefits? F.R.G., Wilmington, Del.

A. No. As stated in the article, benefits are subject to tax if your provisional income (PI) exceeds certain income thresholds. PI is the total of your adjusted gross income (AGI), tax-exempt interest income and one-half of Social Security benefits received. Although Roth IRA distributions may be tax-free, they are not treated as tax-exempt interest income. This provides another tax advantage for Roth IRAs over traditional IRAs. Tip: As opposed to traditional IRAs, lifetime distributions from a Roth aren’t mandatory, either.

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