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What are rules on withdrawing money from 401k?

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My company is closing. I am 71 years old and will be retiring. I'm looking for the lest expensive way to take money out of 401k, about 60k total. Don't want to do it all at once and get killed in taxes. I only get SS each month of 2500 between me and wife. Can I take like $500 or $1000 a month until it's gone. I'm thinking of buying a house, will that help? Most of the sites I've looked at don't seem to be very helpful about this. Thanks.

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Thanks, but I DID mean that buying in Fl is cheaper than renting in Fl. I checked the rentals and they're much more than... (more)

nycdarts (May. 19, 2017 @ 3:58p) |

RMD is figured annually based on the balance as of Dec. 31st.    

More on RMDs : 
https://personal.vanguard.com/us/insight... (more)

jerosen (May. 19, 2017 @ 4:05p) |

I would second a suggestion on doing a rollover of 401k into an IRA first then you have plenty of time to think.
Whate... (more)

invisible (May. 19, 2017 @ 4:54p) |

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You are full retirement age, so you can take it all out at once, and only pay income taxes. You need to look at your overall income for the year, and figure out how much you can withdraw and stay in the 15% tax bracket. Then next year do the same. Try to avoid taking out any money that will throw you into the 25% bracket.

Unless you have substantial income this year, and are already in the 25% bracket, and will be in the following years.  If so then the same strategy holds, only withdraw enough to keep you in the same bracket, without moving into the next bracket.

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Make sure you withdraw at least the RMD.

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Not related to 401K but at your age, why would you want to buy a house and have a headaches that comes with it?  Unless of course you already own one and plan to sell it and buy another one....also how would the loan situation work for you if you no longer have enough income to meet the DTI ratio?

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I agree. You could probably get a sweet monthly rate at a hotel. Think of it this way: no utilities, someone to clean up, free breakfast, pool, and HBO!

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Several companies are available to work out a 401k rollover for you.

This is the Fidelity 401k rollover information website with 401k rollover information includes a telephone number if you are inclined to call. There are Fidelity offices in many cities. Whatever you do, do not accept a direct check. Do paperwork for the transfer.

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Want to buy a house cause moving to FL. I can get something for around 100k with veterans benefit I never used. Would be cheaper than renting and about 1/3 what I'm paying now in rent. Can put down about 10-15%. Just two of us so doesn't need to be anything special. I do have some side work I do bringing in some extra cash. If I do some kind of rollover, it needs to be something I can get at in a couple of days if needed.

Appreciate the help on this, I don't know a lot about it and trying to learn. Hope this will happen within 6-12 months.

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You can find info on rolling over your 401K to Vanguard here - https://investor.vanguard.com/401k-rollover/?lang=en

  • See if a rollover is right for you.
  • Roll over your 401(k) to Vanguard.
  • Pick an IRA for your rollover.
  • Choose your investments.
  • Start your rollover in just a few steps.

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Though according to the current 401 k Rule there are many changes that states that no penalty would be taken from a businessman owner after 55 of age but for more details you should first consult or refer to various sites and take a proper decisions and in the meanwhile try to take the minimum expenses for RMD and stop thinking to buy a house as its a really daunting task in such a situation after you know about the proper penalty of money then plan well to purchase a house.

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That's the longest sentence that doesn't mean anything.

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What kind of sweet monthly rate in FL?

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Go see a fee only financial planner.  A good one can help you figure out how to minimize taxes and achieve what you want to achieve--or tell you whether or not what you want to achieve would cause you to run out of money down the road, etc.  Not enough details here to give you a good answer.  

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OP, unless you are in a high tax bracket forget about being taxed to death. You should be more concerned about the IRS Required Minimum Distributions requirement for retirement plans. You are 71. You should have begun withdrawals by age 70-1/2. Have you started? If not, there's a 50% penalty for non-compliance. Talk to your retirement plan administrator or tax preparer/planner.

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Not retired yet. Company doesn't look good and just preparing for what I think is inevitable.

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If your income is only $30k /year of social security then you can pull up to $17k out of the 401k each year tax free.

State income taxes depends on the state.

OP is not retired now so RMDs are not required. Theres an exemption if you're still working.


Its not clear why you want to take out the money. To spend on a house? To avoid taxes? To spend in general?

OP said " I'm thinking of buying a house, will that help?" Sounds like you think buying a house will help your taxes? No it won't really in this case. or are you wanting to buy a house to buy a house and thats why you want to take out the money?

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sailinlight said:   That's the longest sentence that doesn't mean anything.
  
The president's tweets disagree.

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If your income is only $30k /year of social security then you can pull up to $17k out of the 401k each year tax free.  <== Great that's what I've been trying to find out. 

State income taxes depends on the state.
OP is not retired now so RMDs are not required. Theres an exemption if you're still working. <==  If biz closes will have to retire

Its not clear why you want to take out the money. To spend on a house? To avoid taxes? To spend in general? <=== Will lose income from job so need to make it up. Paying a lot for rent now in NYC, about $2500 a month. Want to move to Fl and see houses are cheap some around 100k on west coast Can use VA benefits to get one with mortgage of between 600 to 900 a month, about 1/3 of rent I'm now paying so why not buy. Seems the cheapest way and maybe get 1st time buyer help.

OP said " I'm thinking of buying a house, will that help?" Sounds like you think buying a house will help your taxes? No it won't really in this case. or are you wanting to buy a house to buy a house and thats why you want to take out the money?   <===Don't want to take a lot out. Have about 75k not the 60k I said. I was counting 15k of it as down payment on house which leaves me 60k. With small mortgage I won't have to take a lot out of IRA cause I don't have a lot of bills.SS should take care of most everything but might need a few bucks more.Not looking for mansion, just a couple of bedrooms and a little yard will do for us. We're don't spend a lot or go out much.

Really appreciate your help on this. I have learned a lot from this board. One guy suggested living in a hotel. That sounds pretty cool and would be about half what I'm paying now. So looks like me taking the minimum RMD plus SS would take care of my expenses and wouldn't drain my IRA quickly, at least 10 years or so.


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SummerSoFar said:   
sailinlight said:   That's the longest sentence that doesn't mean anything.
  
The president's tweets disagree.

  I thought tweets have a 140 character limit.  So, they're shorter.  Plus they usually include non sentences that are one word followed by punctuation.  Wrong! Mistake? Sad!

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In case OP is living in a state where there is state income tax - I'm thinking it would be better to move to FL first and then start withdrawing right? That way no state income taxes on the amount withdrawn.

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nycdarts said:   Not retired yet. Company doesn't look good and just preparing for what I think is inevitable.
  
Just curious... Do you own the company or just work there? I am assuming you work there since you have a 401k, but your original post said your company.

I have nothing to add to the discussion, I was just wondering.

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My company, as in the company I work for. Wish it was my company, we wouldn't be having this thread. The land the building is on alone is worth millions and it's all paid for.

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prozario said:   In case OP is living in a state where there is state income tax - I'm thinking it would be better to move to FL first and then start withdrawing right? That way no state income taxes on the amount withdrawn.
  Good point but it is more than physically moving to FL. OP needs to positively establish residency (domicile) in FL and hence abandon domicile in previous state.

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You should also be aware that the details on your taxes will matter. That $17k figure is based on you being married, filing jointly both being over 65 and having ONLY $30k of social security income and nothing else at all. And the exact details will change annually.   It will usually get marginally bigger each year due to inflation of the deduction but other things could always impact it more.

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fwuser12 said:   
prozario said:   In case OP is living in a state where there is state income tax - I'm thinking it would be better to move to FL first and then start withdrawing right? That way no state income taxes on the amount withdrawn.
  Good point but it is more than physically moving to FL. OP needs to positively establish residency (domicile) in FL and hence abandon domicile in previous state.

His RMDs are going to be less than $3,000/year.  State tax impacts aren't going to amount to a whole heck of a lot.

I'd be more interested in how someone retires and buys a house in Florida with nothing more than $75k in a 401k and a couple of monthly social security checks.  

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I believe The exemption from required minimum distribution applies only while continuing to work for the employer the 401-k  is with. 

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dcwilbur said:   
fwuser12 said:   
prozario said:   In case OP is living in a state where there is state income tax - I'm thinking it would be better to move to FL first and then start withdrawing right? That way no state income taxes on the amount withdrawn.
  Good point but it is more than physically moving to FL. OP needs to positively establish residency (domicile) in FL and hence abandon domicile in previous state.

His RMDs are going to be less than $3,000/year.  State tax impacts aren't going to amount to a whole heck of a lot.

I'd be more interested in how someone retires and buys a house in Florida with nothing more than $75k in a 401k and a couple of monthly social security checks.  

  
Most of the population doesn't have the income or assets the average Fatwallet Finance user does.  They have to make due and live humble in many ways.
.....

On a 100K house he's looking at $600-700 per month.   I see what you're saying, that's a tight budget.  
He may or may not be eligible or use free healthcare through VA.  If so, that's a big benefit compared to many person's his age.

And we don't have any idea as to his health, or whether he has life insurance, etc.  If he's expecting to live another 7 years, right there's another 9K per year that could be available from his 401K.  After that SS would be just supporting 1 person.  (Although OP seems sharp, so he may well have plenty of time left..)   

 

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JW10 said:    Whatever you do, do not accept a direct check.
This is a minor point, but I hear Clark Howard say this often too, and it is a little misleading. The custodian of the 401(k) is going to send a check directly to you. For example, Fidelity won't transfer the funds directly to Vanguard, even for the so-called trustee-to-trustee transfer. The check, however is made out to the new custodian FBO (for benefit of) you, and you do NOT endorse this check. You just send it on to the new custodian.
Rollovers should be easy. The firm you are transferring to is highly motivated to help you and hold your hand, tell you exactly what steps to take, and even send you a FedEx envelope to speed up getting the check to you. In some cases, they might offer an incentive to move to them (if I recall, Schwab was recently offering $500).

Otherwise, as has been said here, I'm wondering if OP is mistakenly thinking he must rollover the money, and/or must take it out at all. Other than the RMD considerations, OP may not need to do anything.

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I would land it in Vanguard to get it out then put it an income fund they have that is a good blend. This might see a return of around 4% over time, or you can get aggressive and shoot for 5 but it might cost you.  If you are insistent on getting it out taking it all at once vs 1/2 in 17 and 1/2 in 18 could cost you much more.  1/3rds might even be sweeter.

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I'd be more interested in how someone retires and buys a house in Florida with nothing more than $75k in a 401k and a couple of monthly social security checks.

Buying a house is cheaper than renting. Lots of 100k homes. Figure mortgage will be 500-800 per month. That's 1/3 what I'm paying for rent in NYC. Just two old folks who don't need much. Just a couple of bedrooms and a little land. Don't care where so shouldn't be a problem. Am Vietnam vet and never used VA Home loan benefits. Taking min RMD will not deplete IRA for well over 10 years. 

My biggest concern was that I thought I might pay about 1/3 of 401k in taxes. Thanks to you guys here, I see I won't, that I can take the min RMD and won't be paying much taxes on it since our only income will be the SS. Both in good health at this time. Not many bills to speak of. I will be paying those off soon. Shouldn't be a problem living on about 3k a month with mortgage and car payment being biggest bills.

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Yeah the payment on a $100k house with a VA loan 0% down is around $500/month. I'd think that $2500/mo of income should qualify you for that. Can't see why social security wouldn't be OK to get loans as long as the debt / income ratios work.

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+1 for being one of the few who are able to live below your means and be realistic.

Please make sure you understand your options and the tax implications before taking withdrawals or initiating a rollover - you generally don't get a "go back" once it's done so it's important to be sure of your actions.

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nycdarts said:   Buying a house in Florida is cheaper than renting in New York City.
Fixed that for you.  Whether buying in Florida is cheaper than renting in Florida is a completely different equation.  Just make sure you have adequately budgeted for the total cost of ownership - insurance, taxes, maintenance, lawn care, all utilities, etc.  

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Thanks, but I DID mean that buying in Fl is cheaper than renting in Fl. I checked the rentals and they're much more than a mortgage would be. Rentals are probably much nicer, but as I said, it doesn't matter much.

Just a little more on the withdrawals. I'm thinking I can take money out monthly as RMD based on the balance from the previous year. Is that correct? I can change that each year? What about a lump sum if it's needed for something, is that allowed?

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nycdarts said:   ...
Just a little more on the withdrawals. I'm thinking I can take money out monthly as RMD based on the balance from the previous year. Is that correct? I can change that each year? What about a lump sum if it's needed for something, is that allowed?

  

RMD is figured annually based on the balance as of Dec. 31st.    

More on RMDs : 
https://personal.vanguard.com/us/insights/retirement/estimate-yo...

You can take out as much as you want whenever you want, (though  you'll potentially owe taxes )   and theres nothing stoping you taking out more.

The RMD is just the *minimum* you are required to take after 70 1/2 years old.

RMDs do go up over time.   For a 70k balance you're going to start around $3k a year but once you're in your 90's it will be more like $6k/yr

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I would second a suggestion on doing a rollover of 401k into an IRA first then you have plenty of time to think.
Whatever you decide do not leaver the money in 401k once you are out of the company as they can charge draconian amount of fees by drastic change of rules not normally sen during normal operations and little you can do to prevent paying those

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