Saving a significant amount of money for your retirement is undoubtedly highly essential. However, you must ensure you’re taking proper steps to tap that money. When you still have a job, you know how much work you need each month. But when you reach your retirement age and depend on the money in your 401(k) account, you need to make sure you're withdrawing the proper amount of money from your 401(k) account without facing any issues.
Age 59 1/2
It doesn’t matter how much money you want to withdraw from your 401(k) account; it’s best if you hold the temptation of withdrawal until you age 59 1/2. When you wait longer to leverage the money from your 401(k) account, you will be able to make your money grow. This way, you can ensure that your money lasts for the entire retirement stage of your life. You can also avoid paying any penalty when you wait until 59 1/2 to use money from your 401(k) account. However, you still need to pay taxes if you have chosen a traditional 401(k) account. The taxes wouldn’t be implemented on your withdrawals if you had a Roth 401(k) account.
Required Minimum Withdrawals
When you reach retirement age to start using money from your 401(k) account, you should start taking the minimum required distributions by the time you reach 70. You will also face a tax penalty if you don’t take the required minimum withdrawals. Unlike the withdrawal penalty, which is 10% of the withdrawn amount, this tax penalty is more severe. If you don’t take RMD from your 401(k) account, you will face a 50% tax on the amount of money you should have withdrawn. This is why you need to ensure you’re taking RMD properly. As per IRS, you cannot roll over your RMB amounts to another tax-deferred account
However, this penalty won’t occur if you want to tap into your 401(k) funds before age 59 1/2. In such cases, you need to pay only the 10% penalty.
When you want to withdraw money from your 401(k) account, the initial withdrawal rate you choose will undoubtedly have a massive impact on the longevity of the money on your 401(k) account. Even though you can withdraw as much money as you want from your 401(k) account monthly, financial experts suggest you should not withdraw more than 5% of your overall value of the accounts every year. If you withdraw more than 5% of the overall funds, you might end up depleting them soon. Make sure you contact solo401k.com
to know more details.
Calculating Monthly Income
From living your life on a steady paycheck to becoming dependent on your retirement savings, it might prove to be a hard task. This is why you need to ensure you’re making the transactions properly from your 401(k) account. One of the best ways to determine the perfect amount of money to withdraw from your 401(k) account is by determining the amount of your paycheck. Once you get that yearly figure, you can easily know how much money from your 401(k) account you need to maintain a healthy lifestyle.
Now you know how much money you should withdraw from your 401(k) account, you should not have any problem. Consider contacting us or visiting our website if you require assistance.