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First time posting in Fooldom. My question is from my in-laws. He (67)
and her (64) have yet to exercise their 401-K withdrawl option and would
like advice on ways to reduce the amount of taxes they have to pay when
they start taking the money out. Also, is it true that they have until age 70 to
take all the money out of an IRA?

They get plenty of income from their pension and rental properties - so
income is not an issue here. They are only looking for options on how to
reduce the amount of taxes they need to pay upon withdrawl.

I realize this post may spawn more questions than answers. I am just
starting my inquiry for them and was just hoping to get basic advise for

Thanks in advance.

Your situation is so typical of retirees now. They don't really need their 401k money to live on and hate to see uncle sam take so much of it at their top tax bracket. The Lump Sum Distribution formulas were created to ease this tax burden and you can use them all at your age. You lose the 5 year averaging formula after 1999 (which is better for larger pensions, but being 64 this year can use the others now or in later years. If you wait, however, the taxes increase as your plans get larger with gowth.

It depends on the amounts involved as to which is better, but you have 5 year and 10 year averaging, and pre-1974 gains treatment if you were in the plans that long. Your average tax rates can run anywhere from 11% to 30% depending on the size of the pensions.

You didn't supply enough information for me to give you specific tax information for your pensions.

Their IRAs are a different story as you don't get the favorable LSD treatment for them, however, they must start taking annual withdrawals from both the IRAs and 401ks at age 70 1/2 (unless they withdraw everything sooner). Depending on their estate tax situation it is probably not advantageous to do anything with the IRAs now unless they can convert them to Roths at a favorable personal tax bracket. Ed
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