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Author: kubena Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: 401K Distribution at age 55 Date: 1/23/2000 3:27 PM
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I recently retired with a $43,000 annual pension for life. I am 55. I have $340,000 in my 401K which have been earning about 15% a year in a balanced fund. My wife and I also have about $50,000 in IRAs.

According to my 401K administator (METLIFE) I can start withdrawing now from my 401K now without paying a 10% penalty. (I will double check with the IRS)

What would be the best strategy for withdrawing money from my 401K plan (say $20,000 a year)?

Would a varible annuity make sense or would that be too expensive? (I don't like annuities any more than you do -- but what about Vanguard?)
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1705 of 19483
Subject: Re: 401K Distribution at age 55 Date: 1/23/2000 4:30 PM
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I recently retired with a $43,000 annual pension for life. I am 55. I have $340,000 in my 401K which have been
earning about 15% a year in a balanced fund. My wife and I also have about $50,000 in IRAs.

According to my 401K administator (METLIFE) I can start withdrawing now from my 401K now without paying a
10% penalty. (I will double check with the IRS)

What would be the best strategy for withdrawing money from my 401K plan (say $20,000 a year)?

Would a varible annuity make sense or would that be too expensive? (I don't like annuities any more than you do -- but
what about Vanguard?)


You have made the decision to take out 20,000 so I guess the question is should you take it out in one or more withdrawls. I would take it out at the beginning of the year (January) if the market is up. If down I would postpone until the market goes up.

I would consider the pension as fixed income investments and get out of the balanced fund into equities. The 20,000 withdrawl is rather high, espicaly if your pension is not inflation adjusted.

The annuitie will only give you certanity and less money. Inflation maybe your biggest problem. Your income may have to double in retirement to keep your purchasing power level.

Read the retire early home page board. Look for withdrawl rate and asset mix posts. Maybe go back one or two thousand posts and skip all that ref IRA, 401k etc.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1729 of 19483
Subject: Re: 401K Distribution at age 55 Date: 1/25/2000 12:43 AM
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First off, you cannot remove $20,000 without penalty. You will need to make an annual calculation to determine the amount to withdraw. The IRS is somewhat confused about this as I got completely incorrect advise from them.

There are some knowlegable folks in the main centers who can set you straight. The rate is 8% but it requires a yearly calculation to determine the actual percentage based upon your and your wife's life expectancy charts. I started withdrawing funds from my IRA at age 49 with no penalty.

If you are not careful, you will find your IRA is a trap. If you allow it to get too big, you will have to take out the funds at a rate that screws up your social security and puts you into a high tax bracket. This completely destroys the aim of the IRA in the first place. No one seems to talk about this, but it is a real problem.

You are very smartto start young. Enjoy the money. You will be hard pressed to spend it all at the rate the Fed will let you take it out without penalty. My experience is, my account keeps growing at over 10% even though I remove the maximum amount. That is the beauty of smart investing.


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