Looking for an IRA savings account

[Thrif-t]

She did not want to get taxed on taking the lump sum .. she would only get taxed if she needs to withdraw which would be for large emergencies. Her withdrawals are limited to 6 per month. The annuity is what she would live on and she has budgeted for it with some room left over for unpredictable expenses.

So with that said.. would you do it differently ?

I can see doing this. He said she'd only withdraw for LARGE emergencies, so if she doesn't have a need for it she will let it sit. Depends how much the lump is but I'm all for paying less taxes, so I can see not wanting to pay them on the lump but rather paying IF a need arose that you would need to do a withdraw.

[Captain Save]

Hard to say but I think I would do it differently. I wouldn't have my emergency fund be in my IRA. In a Roth, maybe, because money can be withdrawn from that at any time without tax consequences, but not in a traditional or rollover IRA.

I'm no expert on drawing down one's nest egg in retirement so I'm not really the best one to answer this question. It just doesn't sound to me like the best way to go here.

There are no tax penalties for the traditional as she is 62... if she decides to roll it over into a roth .. she would have to pay the taxes on the lump sum. putting it in a roth wouldn't have much benefit since the tax advantage is not much .. not having to pay tax on 1% of the lump sum is not worth it IMO.

[Gailete]

She did not want to get taxed on taking the lump sum .. she would only get taxed if she needs to withdraw which would be for large emergencies. Her withdrawals are limited to 6 per month. The annuity is what she would live on and she has budgeted for it with some room left over for unpredictable expenses.

So with that said.. would you do it differently ?

I guess that is part of my confusion. If this money is to be part of emergency, big expenses only, why would she need an account that would allow up to 6 withdrawals a month? That would allow for a lot of expenses over the year. Hopefully she won't be having that many expenses each month. Was there no way to leave the money in the account it was in until she might need part of it? Will she be drawing her social security now or is she going to wait for that? In other words will she be getting SS plus this annuity money and a bank account with money for emergencies?

Whether she rolls the whole amount over now or in a year, etc. depends highly on what her taxable income would be. She could roll the money into an IRA that is invested in a mutual fund paying out bigger interest, that she can still tap whenever it is necessary. But at least the money should be keeping ahead of inflation and giving her more usable income each year if needed. Depending on her taxable income over the next few years she might be able to withdraw segments of her IRA tax free and place it in an account that is a 'regular' account where she might only be liable for the interest or dividends that it earns.

Something about this is bugging my brain as well as seeming convoluted. Perhaps because we know nothing about the rest of her income and out go, like does she own her own home, etc.

I wouldn't put it into a bank savings account, that is for sure. If I was going to roll it over into another IRA, I would be sure it is one that is earning at least 4% interest a year. Such as a mutual fund that invest the same as an index fund or something similar.