Message Font: Serif | Sans-Serif
No. of Recommendations: 6
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.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.