Ask Terry Questions Taxes on 401K RMD

Taxes on 401K RMD

By Terry Savage on January 24, 2024 | Financial Planning / Retirement

We are retired, and taking social security at age 69. We have a substantial amount in 401K savings, the bulk of our retirement funds. For the next three years until we must take an RMD, we would be in a lower tax bracket. Does it make sense to begin pulling 401K funds now, while in the low tax bracket years?

Terry Says

Well, first, you must consider whether the investment options in the 40l(k) plan are appropriate for you at this stage of life. There is an army of financial salespeople out there trying to grab that big pool and give you advice! But instead, read this column, and consider doing an direct rollover to an IRA — where you can put a portion in money market funds or more conservative funds than are typically found in a 40l(k).

The second part is a discussion you should have with your tax accountant about the tax bracket you will be in next year, and in subsequent years. Don’t forget that moving into a higher tax bracket could increase your Medicare Part B and D premiums!
Read this article:

There are a lot of moving parts to this decision. And they are specific to your financial situation. So get a competent CPA and work through the scenarios.

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