I have a 403B and I am over 59!/2. It is only earning 4% so I want to roll it over into a traditional IRA. I may be in a fairly high tax bracket at 70 1/2 . My question is: is there a way to reduce taxes on withdrawals at age 70 1/2 by investing in mutual funds instead of a Bank CD? I know the CD withdrawal would be taxed at around 30% but would that hold true if the money were invested in mutual funds? Are both taxed at one's regular tax rate upon withdrawal? Or could the mutual fund withdrawals be taxed at capital gains rates?~Franny

ANY withdrawal from a traditional IRA is taxed at your normal tax rate, regardless of whether the IRA is in CDs, bonds, stocks, mutual finds, whatever! There is no capital gains rate on IRA money.

A lot depends on how much money you are getting from other sources, like a job or Social Security. Up until you are 70.5 years of age, you can manage the withdrawal to minimize the tax consequence.

Once you hit 70.5, you have to withdraw a certain minimum amount based on an acturial formula. The IRA custodian will notify you of that amount when you turn 70.5 years of age.