401k Vs IRA account

[tomx2]

Hi.

 

I wonder if some of you had to make a similar decision.

Next year I will retire at 51. My 401K is currently around 350K.

I will have to make a decision whether to leave my investments in my current 401k or rollover into a IRA account. I do have a variety of conservative funds available in my 401k to transfer my money into.

When I reach 60, I would like to begin spending $30,000 yearly from this account.

 

(Q1) Is there any advantage rolling the money into an IRA rather than maintain my current 401k?

 

(Q2) When I begin to withdraw the money at 60, will I pay more taxes if I take:

a) The total lump sum

30,000 annually

c) Withdraw 2500 per month.

 

Or it doesn?t matter.

 

(Q3) Using the current tax categories today, am I looking at a 25% slice off the top for the Federal government on 350k from my 401k not including state and local taxes?

 

Thanks.

TC

[Guest]

Tomx2,

 

I know of two considerations that may be important to you, but there may be others.

 

1. With a 401k, but not an IRA, if you are separated from your last company you can begin to draw out money at age 55, rather than waiting until 59.5, without paying the 10% penalty. It has to be from the 401k that you had at the last company, not any other, but you can roll earlier 401ks into that one if you are still employed. Also, the employer's plan must permit the early withdrawals. Apparently not all do. You indicate that you intend to start drawing down at age 60, but the 401k gives you another option.

 

2. You can borrow from a 401k, but not from an IRA.

 

As far as the tax consequences, my advice is to buy the latest version of TurboTax and run the various scenarios.

 

Khun Pad Thai

[jasmine]

Hi,

 

Hubby and I keep certain amount in the 401K beccause of the withdrawing option at 55.

 

Being 51 and if you can go without withdrawing the 401K, I would leave it there and manage the investment within the 401K funds. 401K and IRA should be the LAST withdrawings, Hubby and I will not withdraw them until the law forces us to which I think at the age of 71.

 

Jasmine