Can a 78 year old person who is still working at her job, take out money from her 401k tax free?

Question

My mother, who is married to my father who is not working, is still working and contributing to her 401k at her job in a grocery store in Florida. She is 78 years old and my father is 84. Can my mother take any distributions from that 401 k? Are these distributions taxable just like a normal 401k?

Answer 1

Since she is more than 59 1/2 years old she can take distributions from her 401K without penalty. Since she is still working she does not have to take a "required minimum distribution" which must be taken in the year your reach 70 1/2. She has to take the "required minimum distribution" in the year in which she retires.

However, all distributions from a 401K plans are taxed at ordinary rates. The money was invested tax free, and the tax has to be paid when it is withdrawn.

Answer 2

Short answer: Yes

If your mother and father have a combined income less than about $19,500, then some of the distributions would be tax free. That is because the standard deduction of $10,700 (for 2007) plus $1,000 additional for each of them because they are bove over the age of 65. and two personal exemptions ($3,400 * 2). There is no special treatment for the 401K distributions just because of her age or because she is still working and contributing to it.

Answer 3

A 401K lets you put tax free money in, but you must pay taxes when you take distributions. So, yes she can take money, but taxes will be due.

Answer 4

Tax Free? No. But if their exemptions and itemized deductions (or standard deduction) exceed their income, they might not owe any taxes. However, the distribution would have to be reported on their tax return.

Answer 5

401(k) distributions will always be taxable because the contributions were made with pre-tax money.