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Author: synchronicityII Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: Re: 401k withdrawal taxes at retiremtent Date: 7/10/2013 1:28 PM
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The reason I want to cash out the 401k is to avoid paying higher taxes on it after I start drawing Social Security. The lower tax bracket would save me 10% in taxes. Then there is also the matter of estate planning on which, after my demise, it will be a lot easier for my heir to access his inheritance if it is in a cash acccount rather than tied up in a 401k or IRA.

Rolling the funds into a Roth may be an option, but I believe that I would then have to wait 5 years to withdraw any money from it. I am also not sure how inheritance law handles a Roth.


As other knowledgeable posters have noted, you REALLY need to talk to a professional who knows about retirement and estate planning. As noted, there are a number of ways to mitigate increased taxes which may result from Required Minimum Distributions (RMDs) being made while receiving social security benefits. The "save 10% in taxes" may not be entirely correct, and you need someone who can A) crunch some numbers specific to your situation and B) present various options which you may not be totally educated about currently. The "convert $X/yr to a Roth" option is just one that was noted earlier.

Obviously we don't know your entire situation, but your comments regarding estate planning would appear to be incorrect.

Circular 230 disclaimer - this is the intermaweb and I could be a dog for all you know. Talk to a real professional, don't rely on anything I say, and saying "I read this stuff online" won't help you with the IRS.

-synchronicity
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