Craig Wear, CFP® advises that clients under age 59½ should avoid paying taxes directly from an IRA or doing conversions while under that age because of the 10% early-withdrawal penalty and taxable conversion consequences. Instead, he suggests using other assets or redirecting discretionary income (for example, reducing 401(k) deferrals) to cover tax payments and recommends running the math to evaluate options.
But again, a lot of our clients do that very successfully. You just need to run the math and see kind of how that's going to affect you as well. Another situation is that if you're under age 59 and a half, you really don't want to do that. You don't you don't want to pay taxes from the IRA because you've got penalty considerations. If you do the conversions under 59 and a half, you got that 10% penalty. You got to pay tax on it, all those kinds of things. So for our clients that are under 59 and a half, we try to get creative with are there other assets you can use? Can you stop making some of the contribution to your 401k and redirect some of that discretionary income over to pay taxes? A lot of different opportunities there. If you're under 59 and a half, you got to be a little bit careful of how you do it. But.
