Author Topic: How Best to Get $ Out of 401(k)?  (Read 813 times)

Nickel

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How Best to Get $ Out of 401(k)?
« on: April 27, 2018, 03:49:03 PM »
When 90% of your savings (1.5M) are in a 401(k) at age 55 (no 10% penalty), what is the best way to get it out?

Slow -- qualify for ACA subsidies until Medicare but face RMDs at age 70 1/2 and have limited financial flexibility

Medium -- lose ACA subsidies and other benefits of lower income but stay in 12% tax bracket (about $100K/year for married couple with $24K standard deduction) -- probably the best option -- get travel insurance and spend at least 6 months per year outside US.

Fast -- pay higher income tax rates now to push all the $ into a Roth ASAP and create a source for lifetime tax free growth and income.  This shrinks the stash but creates more flexibility, including the ability to return to Oregon sooner (where state income tax is 9%) after relocating to Washington (to avoid state income tax while draining the 401k).  Note: Oregon does not tax social security payments.

These are the new tax brackets for 2018:

Rate   Individuals            Married Filing Jointly
12%   $9,526 to $38,700    $19,051 to $77,400
22%   38,701 to $82,500    $77,401 to $165,000
24%   $82,501 to $157,500    $165,001 to $315,000
32%   $157,501 to $200,000 $315,001 to $400,000