[GNC] IRA/401K income detection

[Michael or Penny Novack]

On 3/10/2022 2:15 PM, Stan Brown wrote:

> If you make out a check to "cash" and cash it at the bank, is that
> income? No, of course not. Your net worth is the same before and after
> cashing that check.
>
> The same is true of making a withdrawal from your IRA. Despite the fact
> that the tax laws treat it as income, it is not income.

It is FAR more complex than that. It is NOT a "simple transfer" because 
the IRA or 401K was not a simple asset. It is a "tax deferred" asset 
(income you received earlier but that was (temporarily) not considered 
income for tax purposes. It is becoming income NOW (when you take a 
distribution)

But it is more complicated than that. The 401K contributions could have 
been a mix of "before tax" and "after tax" contributions. Distributions 
from the after tax contributions is not taxed as income. You'll really 
have to look at the distribution statement from the plan administrator. 
And if the IRA is a Roth IRA, that's different too.

  Maybe should reconsider the 401K/IRAs/Roth IRAs kept on the books as 
an asset? I see this "your net worth" making the assumption the "the 
books" (by themselves) should always be enough. For some of us, a better 
picture of our total net worth might be "net worth on books" + X + Y 
where X, Y, etc. are things that have substantial "worth" but might be 
"conditional" and/or not marketable or marketable at only a fraction of 
their value. I treat my 401K like that BUT it's only one of the things I 
have to add in (or did)

Michael