My aunt passed away recently and left me as one of her beneficiaries. I am currently active duty military and as a result have a relatively low taxable income. I also am currently exempt from state income taxes. I plan to exit the service soon and will in turn likely be paying both a higher income tax and state taxes, so because of this I am electing to take a lump sum distribution. A majority of the lump sum is probably going to be hit with the 22% tax rate by my calculations. I talked with the financial advisor of my aunt's account, and they said I can choose to either have income tax withheld or not. My question is, if I were to take the money without taxes being taken out, couldn't I in theory come out ahead since that money is going to compound over the next year by a larger amount than if I have taxes taken out now? What would you do in my situation with that? I understand the tax bill I get hit with next year may be a lot, but wouldn't my larger gains sort of help counteract that? Thanks for your time.
original posted by njrm98 to r/personalfinance on Wed, 28 Feb 2024 19:15:31 GMT.