I’m 65, earning at my “absolute peak” and won’t be retiring any time soon. Should I use my Roth IRA for a $30,000 home improvement project?

Ask a Consultant: I am 65 years old, earning in

Ask an Advisor: I’m 65, earning at my “absolute peak” and not retiring anytime soon. Should I use my Roth IRA for a $30,000 home improvement project?

I am 65 years old and have reached my absolute peak earnings. I am also in the 35% tax bracket and am not looking to retire soon. I need 30 thousand dollars for my home project. I have enough to take it out of a non-qualifying brokerage account, but I will pay capital gains taxes on what I liquidate. I think the best place to take it is in my Roth IRA so I don’t add to my tax bill. A mortgage loan is not in the picture because I need that money fast. If you’re going to say no to a Roth withdrawal now, when is the right time to withdraw from a Roth IRA? Our children are well off and do not need it as an inheritance in the future.

– Joseph

While seeking to minimize the tax impact from this individual venture is important, it is not the only consideration when you are deciding which account the money should come from.

before using a file Roth IRA To cover the cost of the project on the basis of minimizing the tax bill in the short term, it is also crucial to consider the long term taxes and financial planning The implications of withdrawing from each account and when.

I can answer your question in general terms as it applies to most taxpayers, but I will caution that it is best practice to consult a tax professional who knows exactly your complete tax picture. (And if you need more help with your tax strategy, consider matching with a financial consultant with tax experience.)

Examine your tax situation

Ask a Consultant: I am 65 years old, earning in

Ask an Advisor: I’m 65, earning at my “absolute peak” and not retiring anytime soon. Should I use my Roth IRA for a $30,000 home improvement project?

As you may have noticed, there are no immediate tax implications if you withdraw money from your Roth IRA since you are over 59 years old. Because you are at 35% income. tax bracketthe price you pay for it Capital gains taxes of the brokerage account taxable will be either 15% or 20% depending on your tax filing status (married and jointly registered, single or head of household) and actual income.

If you are ready to match up with local advisors who can help you achieve your financial goals, then let’s start.

Although it may seem safe to assume that tax rates will be lower in retirement when you do not receive income from working, I caution against this assumption. The current income tax rates are set to expire at the end of 2025, and are relatively low by historical standards.

Consider a taxable withdrawal

In general, if you are not near the top of the 35% income tax bracket and will be facing capital gains tax of 15%, it may make sense to use brokerage account To withdraw while you have income to support your current tax bill.

Furthermore, while the total value of your brokerage account may indicate that you will owe capital gains taxes on withdrawals, you should review the individual holdings within the account and consider Harvest tax loss opportunities.

Given the volatile market environment and drawdowns in most asset classes in 2022, it is possible that some holdings may have depreciated below the original cost basis, depending on what you own and how long you’ve owned it. If that’s the case, you can sell some of the assets that lost value and use those realized losses to offset capital gains elsewhere in the account, thus reducing your tax bill.

If harvesting tax losses isn’t an option, another strategy would be Gifting resident securities to a charitable organization. In doing so, you will avoid paying capital gains taxes and benefit from a tax deduction equal to the full market value of the assets donated. The tax savings from this approach can help offset any tax burden associated with liquidating a portion of your taxable account for the home project. (And if you need help with tax losses or gifting securities to charity, consider working with a financial consultant.)

The purpose of a Roth IRA

Ask a Consultant: I am 65 years old, earning in

Ask an Advisor: I’m 65, earning at my “absolute peak” and not retiring anytime soon. Should I use my Roth IRA for a $30,000 home improvement project?

So why pay taxes on withdrawals from your taxable account when a Roth IRA provides a tax-free source of funds? Because, in general, it will defeat the purpose of a Roth IRA.

Roth IRAs are designed to provide tax-free income the retirement, is not a tax-exempt source of general purpose funds. Unless you expect to receive a pension or passive income in retirement, these are likely to be your main sources of income Social security and your savings, including your Roth IRA. Therefore, I believe that with the information you have provided about your situation, it would be unwise to take advantage of a Roth IRA until retirement, even if preserving its value for the next generation is not a primary consideration.

Roth IRA contribution limits It is already relatively low, and since you are above the income threshold to contribute, you can only do so through Backdoor contributions. Your ability to benefit from the strength of a Roth IRA will be reduced if you withdraw valuable money from it before you retire. Your savings will be more valuable in retirement if you allow the $30,000 in your Roth IRA to continue to double tax-free than if you allow the money in a nonqualified brokerage account to accumulate taxable gains. (And for more help with managing your retirement accounts, consider Matching with a financial advisor.)


On the surface, it may seem ideal to withdraw money from eligible accounts to reduce your current tax bill. However, you should consider the long-term tax implications of the withdrawal sequence and evaluate the purpose that each account plays in your overall financial plan. With taxes, there is no one-size-fits-all recommendation Work with a professional It will increase the likelihood of getting the best results. Approaching a home improvement project—or any major expense—in this way will produce results that better align with your financial goals.

Tips for finding a financial advisor

  • Finding financial consultant It doesn’t have to be difficult. Free SmartAsset tool It matches you with up to three vetted financial advisors serving your area, and you can interview your own advisors at no cost to determine which one is right for you. If you are ready to find a counselor who can help you achieve your financial goals, let’s start.

  • Consider a few advisors before settling on one. It is important to make sure you find someone you trust to manage your money. When you consider your options, These are the questions you should be asking Counselor to make sure you make the right decision.

Lauren Montagne, CFP®, AIF®, SmartAsset financial planning columnist and answers readers’ questions on personal finance topics. Do you have a question you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Lauren is the Senior Retirement Plan Advisor at DBR&CO. It has been compensated for in this article. Additional resources from the author can be found at dbroot.com.

Image credit: © iStock.com / alfexe, © iStock.com / Kameleon007

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