How are Traditional IRA distributions taxed?
All earnings and deductible contributions become subject to tax on withdrawal. The tax rate is based on the individual’s ordinary income tax rate at the time of withdrawal. If your tax bracket is lower when you receive a distribution than when your IRA earned income, you benefit from tax savings in addition to tax deferral on the earnings. Taxable distributions taken before you reach age 59 are subject to a 10% federal penalty tax. Generally, distributions are not subject to the penalty tax if taken after age 59, or on account of disability or death.
