3 Reasons to Start Liquidating Your IRA(s) Sooner Than You Think
(don’t forget to checkout the video of this blog post too)
Why Waiting Might Cost You — and Your Heirs — More Than You Realize
Legendary tax expert Ed Slott puts it bluntly:
⚠️ “An IRA is an IOU to the IRS.” ⚠️
In other words, your IRA is a tax-deferred time bomb.
You’ve built it with discipline, watched it grow, and relied on it as the foundation of your retirement — but make no mistake: every dollar in your IRA comes with strings attached.
And perhaps the worst part?
You’re in a partnership with the federal government… and they can change the rules of that partnership at any time.
If your goal is to maximize retirement income and legacy, here are three powerful reasons to consider strategically liquidating your IRA sooner than later.
✅ 1. You Can Choose Your Tax Bracket Right Now
Today’s tax brackets are known. Future tax rates? A total wildcard.
If you start taking controlled withdrawals or performing Roth conversions now, you decide how much to take and which tax bracket you fill.
But if you wait until Required Minimum Distributions (RMDs) force your hand?
- You could be in a higher bracket than expected
- You lose flexibility
- You pay more in tax — and potentially more in Medicare premiums, too
Strategic withdrawals now = tax control.
Delaying could mean surrendering that control when you need it most.
✅ 2. Don’t Accumulate More Wealth in a 100% Taxable Environment
The longer your IRA grows, the more you owe Uncle Sam.
Every bit of growth in your IRA is taxed at ordinary income rates when withdrawn.
There are no capital gains discounts, and no tax-free treatment — just pure, unavoidable taxation.
That means you’re growing your wealth in a highly taxed silo.
Not ideal.
Instead, consider:
- Repositioning funds into Roth IRAs for future tax-free income
- Using tax-efficient non-qualified accounts
- Leveraging life insurance or other tax-advantaged vehicles
Accumulating wealth is great.
Accumulating tax-heavy wealth?
Not so much.
✅ 3. Protect Your Heirs from Massive Inheritance Taxes
The SECURE Act changed everything about IRA inheritance.
Gone are the days when your children could “stretch” an inherited IRA over their lifetime.
Today, most non-spouse beneficiaries must liquidate the account within 10 years.
If your children are in their peak earning years when they inherit your IRA, they’ll likely:
- Be pushed into higher tax brackets
- Pay huge sums in income tax
- Lose out on a large chunk of the wealth you intended to leave them
Even though leaving behind an IRA is well-intentioned, it can end up being more of a tax burden than a blessing.
🧾 The Bottom Line: IRAs Are Powerful — But They Aren’t Perfect
There’s nothing inherently wrong with an IRA.
It’s a solid savings vehicle.
But too many retirees cling to the idea that deferring taxes is always good.
The truth?
Tax deferral without a liquidation plan is a trap.
The smart move is to:
- Take control of your tax bracket now
- Reposition taxable assets into tax-free or tax-efficient vehicles
- Create a strategy that benefits both you and your heirs
📣 Final Thought: Don’t Let the IRS Write the Final Chapter
If you’ve built a strong nest egg in your IRA, that’s a huge win.
But don’t let all that hard work become a future tax liability for you — or your family.
There are smarter ways to unwind your IRA tax-free over time, especially with today’s historically low tax rates.
Curious about how to unwind your IRA tax-efficiently?
I’d be happy to help you explore a personalized strategy.
Connect With Me & Access All My Resources Here
Enjoy this blog? You’ll probably enjoy this one as well: My Wife and I Are 60 with $2M: Can We Retire in 4 Years with $10,000/month (+ a $25k/year vacation budget for 10 years)!?
P.S. Make sure you checkout my new one-page Long-term Care guide.
To your success,
Matt
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