Withdrawal from 401K Account?

[JeffKeryk]

school wont teach you, nor will people take the opportunity their job gives them regarding company matches on 401k, or will they chip into a IRA, or can you get them to stop using credit cards.. the whole economy revolves around debt..

but the internet is a wonderful thing, if a person wants to research things.. you find the guy who reads the business section of the newspaper before he reads the sports or the front page... that is the guy to listen to.

Disagree. School can teach. IMO, no one should get outta grade school without an understanding of savings and checking accounts, and the time value of money. What credit is. By the way, credit is a tool; like any other tool used correctly it will get the hob done. Used incorrectly and you might get hurt. Credit is simply using other people's $$ to buy things, hopefully an appreciating asset.

No one should get outta HS without an understanding of markets; stocks vs bonds, funds, mortgages, etc.

Armed with this knowledge is no guarantee people will act in a sound financial manner, but it gives them a far better chance.

 

[MSCH]

Disagree. School can teach. IMO, no one should get outta grade school without an understanding of savings and checking accounts, and the time value of money. What credit is. By the way, credit is a tool; like any other tool used correctly it will get the hob done. Used incorrectly and you might get hurt. Credit is simply using other people's $$ to buy things, hopefully an appreciating asset.

No one should get outta HS without an understanding of markets; stocks vs bonds, funds, mortgages, etc.

Armed with this knowledge is no guarantee people will act in a sound financial manner, but it gives them a far better chance.

I said they dont.. not that they couldn't just that they dont. It's also worth saying how many teachers are financial experts.. think that thru, most of them have a student loan thru the roof that qualified them to get a job that pays 40k a year to start.

 

[JeffKeryk]

I said they dont.. not that they couldn't just that they dont. It's also worth saying how many teachers are financial experts.. think that thru, most of them have a student loan thru the roof that qualified them to get a job that pays 40k a year to start.

We are aligned. I have been saying for years personal finance should be part of the cirriculum. Grade school should not be that difficult. High school will take some doing, but it is a sound investment, in my opinion.

 

[BMWTurboDzl]

I'm 67 and retired over a year now. Low budget person and everything is paid off. Just have normal monthly bills and making do with SS. Have enough $ to live a few more years in my checking account. (shy of nursing home, etc.) But my health is not that great, so I don't expect to live many more years to become an old man. I have three 401K accounts from previous employers.

Last I checked (few years ago) with one of the 401K accounts, they deducted $40 for every check or deposit they gave me. So that may have changed.
I'm just thinking on spending some of the $ before I die. Maybe just be more generous to my kids at Christmas and birthdays or whatever.

But $40 per month will not cut it for me in expense. Say I draw out $12,000 once per year, instead of $1000 per month? Have not talked with my tax lady either yet. Any advice from those with more knowledge than myself? I'm no financial whiz for sure. Any tax advantage one way or the other, or will it all even out at the end of the year? Just using these figures for easy thinking people as myself.

It doesn't matter when you take distributions. It's going to be subject to the same amount of tax either way.

 

[BMWTurboDzl]

No sir! Heirs get the stepped up value of assets at the time of death of the benefactor. If you bought BRK A stock for $10 a share in the 1960s and your heirs inherited it today and sold it for $490,000 a share they wouldn't owe a cent in income taxes.
But if you are referring to ordinary (not Roth) IRAs and 401ks, you are completely correct.

Assuming it didn't climb to $490k the day after the parent passed away.

 

[ArrestMeRedZ]

Assuming it didn't climb to $490k the day after the parent passed away.

True dat, but it would be a great problem to have!

 

[Dave Hess]

Enjoy the money while you can, set some aside for loved ones you want to help.

 

[pbm]

If one pays appropriate tax at the start of the year, there is no tax consequence. If tax is underpaid, there can be penalties.

Also, the IRS may conveniently become confused as to when income is paid, vs when taxes are paid. And put one through "the process". My point: What ever you do, document it well. I got a bonus at the end of the year, and the IRS insisted I should have paid more tax during the year. NONSENSE.

It's hard to believe that 87000 new armed IRS agents are being hired to insure the 'rich' pay their taxes.

 

[nickaluch]

I have chronic health issues and am not yet retired. I won't tell you to "save or spend". I simply suggest you estimate your lifespan and plan accordingly. That's my plan. Build in some wiggle room, in case you exceed your expectations or have special needs later.

As for giving to the grandchildren, I'd suggest against it. Giving money away to family is a key financial mistake that people only "think" they can afford.

I agree give it to them at the end

 

[ARCOgraphite]

It's hard to believe that 87000 new armed IRS agents are being hired to insure the 'rich' pay their taxes.

I never believed that number, this is the last number I saw reported. You can also look at govt. job postings.

Just saw this number -

WASHINGTON, April 6 (Reuters) - (This April 6 story has been corrected to reflect an IRS clarification that full-time-equivalent hiring figures for FY 2024 are cumulative with FY 2023 figures, not in addition to FY 2023 figures)

The U.S. Internal Revenue Service plans to hire nearly 20,000 new employees and deploy new technology over the next two years as it ramps up an $80 billion investment plan to improve tax enforcement and customer service, it said on Thursday .

 

[ARCOgraphite]

from IRS.gov -
In Fiscal Year (FY) 2022, the IRS collected more than $98.4 billion in unpaid assessments on returns filed with additional tax due, netting about $58.8 billion after credit transfers (Table 25XLSX)

 

[Pablo]

Late to the party here.

#1 get those 3 401Ks rolled into an IRA at a single place. I use and like Fidelity, your choice. A Roth might be OK if you want to pay taxes now, or just a standard self directed IRA would be simpler, no fee or holding time, take it out when you like and have as much withheld for taxes as you like.

Designate your beneficiary at a single place is easy too.

I won't give advice what do to investment wise, and I have no idea what your old 401K's had the $ in, but money markets and 3 month CD's (~5%) are super simple to buy with Fidelity brokerage.

If you get confused with the few terms, ask away.

 

[zzyzzx]

What kind of scam artists are charging you $40 per withdrawal?
Transfer your 401K to Schwab or somewhere else.

Probably all 401K's do this. An IRA typically won't do this, which is why you should transfer money out of 401K's and into your IRA's.
Either that, or it's a charge for a paper check when you could do an ACH transfer for free.

 

[Pablo]

The only advantage of keeping old 401K's used to be that a 401K offered some slight potection advantage from suing parties. I'm not even sure if that is true anymore. I bet you can't even borrow against them if you are not working there anymore and that's a stupid idea anyway.

Other than that - old 401K's (three, my goodness) are all disadvantages. Investment choices usually suck, interacting sucks, getting cash suck$, prepaying/withholding sucks....the list goes on. I honestly think the scariest part might be just the lack of the ability to diversify.

 

[dja4260]

Right now I'm earning over 5% in a high interest savings account. I'd pull that money in this market and plop up to 250k as it's FDIC insured into one of these savings accounts and do as you please with the interest which is over $1k per month @ 250k.

*I'm not a financial advisor*

 

[zzyzzx]

It doesn't matter when you take distributions. It's going to be subject to the same amount of tax either way.

True, but if you, for example, moved to a state with no income taxes in retirement you at least avoid state income taxes on the distributions.

 

[zzyzzx]

The only advantage of keeping old 401K's used to be that a 401K offered some slight potection advantage from suing parties. I'm not even sure if that is true anymore.

That might be dependent on what state you live in:
https://www.investopedia.com/articles/investing/092215/how-protect-your-retirement-lawsuits.asp

For example, California is a precarious state in which to own a retirement account if you are being sued or filing for bankruptcy. In California, IRAs are not as well protected as 401(k)s.

It is important to note that some states have limited or no laws protecting IRA savings in case of lawsuits. On the other hand, the best states for IRA protection in a lawsuit are Texas, Washington, and Arizona. In Arizona, only IRA contributions made within 120 days of the lawsuit are exposed to risk by the claimant.