If I plan to reite at age 57. What is the best way for taking out money from my 401K with minimum tax applied?

Answer 1

If you leave your job after age 55 then the 10% penalty does not apply....but to get minimum tax application you need to sort out how much you want to take which means installments. Your 401k may not allow for installment payments so you may have to roll it into an IRA to do this.

But the problem is that you get hit with the 10% penalty from an IRA if taking it out before age 59 1/2...So what you need to do is research a provision in the tax code called 72(t). That's what you are looking for...substantial but equal payments that are based on your life expectancy. Those payments have to go for 5 years or until you hit age 59 1/2 (whichever is GREATER) before they can be changed.

It may not get you the flexibility you want or enough money...but it's likely your minimum tax liability which is what your question asked. 72(t)....google it.

Answer 2

All bozos!
1. Medicare starts at 65
2. You don't need to keep the money in your 401k, usually after you leave employment you don't want to. Control your own money. Roll it over into a traditional IRA with no tax liability or penalties.
3. When you withdraw a monthly income at 57 you will have to pay taxes on it because it is qualified money. You will also have a 10% penalty from the IRS only on the money you withdraw. So, either wait to retire at 59 1/2 or take as little money as you can out or none if you have other money to live on in a Non Qualified Account (CD, savings, money market, etc.) and wait til you are 59 1/2 to draw from your ROLLED OVER IRA

Answer 3

Wait until you are 59 1/2. Make sure if you retire that you have adequate health insurance- Medicare does not kick in until you qualify for SSA. Which is, if you are 56, not until you are 67.

EDITED:

BTW I am not a BOZO but I had also considered retiring early and found that the $670 in health insurance costs monthly would be prohibitive. Waiting a couple of years and putting extra funds into accounts that I could draw on without penalty was the better answer. I also figured out that I would be bored to death.

Answer 4

You can take out up to 10% to receive the lowest tax. Don't forget you also get a benefit of adding $2500 a year to your IRA and claiming it on your taxes. The best thing to do is to get a financial adviser. We have gone through Edward Jones Investment, and it does not cost anything to speak with the adviser, and once a year he meets with us to go over our plans. There is a very small annual maintenance fee for your IRA, ours is $35 a year! Well worth it. So go talk with an adviser, there are several great firms out there to choose from.