401 K contributions at age 70
Hi Terry,
I work full time. My wife is retired. We are in the 24% tax bracket and are both 71 years old . I am maximizing my 401 k contributions and plan to do the same next year.
We also have a brokerage account with about 90% in stock mutual funds that we plan to leave to our heirs and will not be touching.
Would it make better sense to only fund my 401 k up to the 5% company match and put more money into the brokerage account where our heirs will receive a step up in cost basis when they inherit this fund?
Thank you
Terry Says
That’s an interesting question –and a very sophisticated one! You never know what will happen in retirement, and whether you might be forced to dip into your after-tax stock account. But at least those will be taxed as capital gains if you need the money.
At retirement you’ll likely roll your 40l(k) plan into an IRA rollover. And next year you will be required to take distributions. Those will be taxed as ordinary income, of course. But the balance will grow tax-deferred.
What really concerns me is whether you have made the other necessary plans for retirement –including health insurance, Medicare, supplement, Long Term Care Insurance, etc. For that, I highly recommend at least one meeting with a FIDUCIARY (not trying to sell you anything!) fee-only Financial Planner. Find one using this link at my website.
I’m worried that you’ll spend a lot of time on the decision you have posted in this question — and not nearly enough time considering all the other financial implications of retirement! That’s why you need someone to look at your overall situation.
