IRA inheritance--Lump sum or over 5 years

[Matt Williams]

I need to decide how to receive my father's retirement acct.  The choice is:  take lump some now, at $86k, or take over five years from the total value of $115k.  Guessing my income to be about $80k.  This puts me under the 0% cap gains tax rate for the first $16k, MFJ, then at 15% on the remaining $70k if I take the lump sum.  Am I thinking correctly on this?

I am considering investing with DFW Hard Money, as per recommended by a long term investor and mentor.  They provide 8% return.  (I am open to any other investment suggestions as well, but using this as a baseline to compare my options). If after taxes on the lump sum, I am left with 75,500, compounded yearly at 8  % after 5 years, I have about 111k

If I go with the 5year payout, getting the first 16k tax free, and paying 15% on the last 7k, that nets a yearly investment of almost $22k, netting about 139k after 5 years.

Is my thinking correct here?  Anything else I should consider?  Yes, my income could go up or down, which would throw off the 5year plan calculations.  Open to other suggestions.

[Julius Vincent]

Hey @Matt Williams - Just an FYI that IRA withdrawals are taxed as ordinary income, not capital gains. So the 0% capital gains bracket wouldn't apply here.

Spreading it over 5 years could give you more control over how much you’re taxed each year, especially if your income might fluctuate. Plus, it could help you keep more of the money invested longer and let it compound.