Prosperity is just around the corner!
Posted on 03/11/2024 10:40:09 AM PDT by ChicagoConservative27
It’s a pretty terrible sign of the times when a record number of Americans are forced to plunder their 401(k)s.
“A record share of 401(k) account holders took early withdrawals from their accounts last year for financial emergencies,” reports the Wall Street Journal. “Overall, 3.6% of its plan participants did so last year, up from 2.8% in 2022 and a pre-pandemic average of about 2%.”
The whole point of a 401(k) is to keep that money out of reach until you reach age 59 ½ or above. Removing that money earlier is about the worst financial move anyone can make. The beauty of these retirement accounts is that 1) you defer your income tax on your contribution, and 2) you invest long-term and watch your money grow and grow over the decades.
(Excerpt) Read more at breitbart.com ...
Greatest Economy Ever! NOW YOU KIDS GET OFF MY LAWN!!
You might as well plunder your 401(k) before Joe Biden does...
This was the long term plan all along, to get the $$ out of the 401k’s. Govt hates them.
If a man wants to drink something besides Bud Light, it cost money. So, should I leave it to my kids and drink light beer? No way.
I had to hit mine after an injury, and again during the created covid crisis.
So, while in ideal circumstances one shouldn’t hit them, circumstances aren’t always ideal.
What Joe's handlers and cronies are looking to do is make it all taxable. Not just disbursements. But that is looking to be somewhere down the road from now.
I'm going to retire in about 6 weeks, so looked into what the best options are for my 401K. I learned that if I withdraw it all, the IRS gets 20% right off the top (I'm over 70). If I leave it in, and withdraw a monthly amount, that amount would still be heavily taxed. So I don't know what the best course of action is. Would not mind some suggestions from FReepers.
“… looked into what the best options are for my 401K. I learned that if I withdraw it all, the IRS gets 20% right off the top (I’m over 70)….”
***********************************************************************
That’s 20% of the distributed amount WITHHELD for fed tax. If your 401K amount is substantial you could well put yourself in a tax bracket higher than 20%… up to 37%. Plus depending upon where you live you would owe substantial state and local income tax on it.
Most people would be off NOT taking a total distribution but instead take amounts out over time as needed.
This is similar, somewhat, to my own reasoning for making a small early withdrawal.
My Roth IRA was (and is) heavily vested in a mutual fund with great exposure to Nvidia and other hot AI chipset companies. The gains over the past couple of years have been incredible. I figured was a good time to lock in some profits, regardless of the 10% early withdrawal, and use the money for various personal and family projects and priorities.
There could be others with the same line of reasoning.
Thanks House Atreides. Your insight is much appreciated by me.
And their banking friends cashing in on those obscene fees for withdrawal.
>I learned that if I withdraw it all, the IRS gets 20% right off the top (I’m over 70). If I leave it in, and withdraw a monthly amount, that amount would still be heavily taxed. So I don’t know what the best course of action is. Would not mind some suggestions from FReepers.
It’s going to depend on your location and other income sources, and of course prediction on future taxation rates.
The goal is to minimize tax paid by staying in the best tax brackets.
A secondary goal would be to maximize income — or not depending on your needs. If you expect your 401k to continue to do well, no need to pull it fast. OTOH if you expect risk, go faster. You could always re-invest back into a personally-owned (or personal trust) investment account for options not in your 401k.
Lastly don’t forget the RMD; no point in penalizing yourself with that rule.
So tl;dr: it depends. Get your spreadsheets out :)
It's a race! I'm due to pull the trigger in about 10 weeks.
Seriously, I have worked with a number of CFPs over the last few years and all of then stated that pulling out the full amount is not the way to go. Clearly.
As I understand it, there are penalties and the taxes will far outweigh the taxes on what is withdrawn incrementally...which, as I'm doing is to roll off into a different vehicle which is also tax deferred . Once you build a strategy, the tax liability is quite lessened.
BUT...I am not the financial wizard in this mix. That would be my wife. She's an ace.
Plan you work and work your plan.
This trend has been noted before, with no attention from the media, as usual. Together with the upward spiral of credit card debt under the burden of high interest, and the rising rate of delinquencies and defaults, it is one more of the gathering storm clouds. The way out of this unsustainable trajectory will be political, not economic, and we are not going to like it.
I wish you the very best in your retirement, and thanks for the insights you shared.
A quick calculation.
If you make $30,000 at age 30 and contribute 10% and employer does 50% match and rate of return is 5% and you retire at age 65,
You get: $477,000+
Buy individual stocks as I did. In 12 years I was able to retire going from $13,000 to seven figures despite congress causing a major drop in 2022 and 2023 and expect my AMD stock to double again this year.
In the last 4 months it doubled.
Look at Nvidia as it too doubled in the last 4 months and tripled in the past year.
Buy AMD and Nvidia. Get rich!
Thanks! The waiting is the hardest part.
Prosperity is just around the corner!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.