How Can You Manage Your Savings When You Retire? Your 401(k) Will Help!
Funds that are saved in a 401(k) are intended to provide you with income in retirement. IRS rules prevent you from withdrawing funds from it without penalty until you reach age 59 and a half.
With a few exceptions, early withdrawals before this age are subject to a tax penalty of 10% of the amount withdrawn, plus a 20% mandatory income tax withholding of the amount withdrawn from a traditional 401(k).
After you turn 59 and a half, you can begin taking distributions from your account. One of the most significant decisions new retirees must make is what to do with the money in their company-sponsored 401(k) plan.
You can typically maintain your 401(k) with your former employer or roll it over into an individual account for retirement.
IRAs carry the same tax benefits as a 401(k) and typically offer more investment options, but there are instances when it makes sense to keep your money in the 401(k) plan.
This can all sound a bit confusing, so let’s simplify it! Here’s how to decide what to do with your 401(k) when you retire:
…Continue reading to see what you CAN and CAN’T do!