Retirement withdrawals
Hi Terry — I have a substantial amount of money in my 401k which is my only source of income besides social security. How can I avoid paying taxes on this money? Should I roll this into another account?
Terry Says
Sorry, but there is no way to avoid taxes on your 40l(K) withdrawals. The government let your money grow tax-deferred along the way, giving you a chance to build up that nice retirement fund. Now it wants its cut!
But work with your tax advisor to make sure that not only do you take your RMDs (required minimum withdrawals) every year (and if you haven’t started yet, you can wait until you’re 72 to start under the new law). And make sure you try to stay under the income levels that move you to a higher tax bracket — and higher Medicare premiums — if you don’t need the money and aren’t required to withdraw it.
Taxes aren’t the most important thing here. Just make sure you’re investing – -and withdrawing — at a rate that means it’s likely your money will last your lifetime!
