The Question
Should I withdrawal from 401k at level to avoid higher tax bracket?Should I withdrawal from 401k at level to avoid higher tax bracket?
I am 68 years old, retired and living off Social Security and a small pension of about $30,000 total after I pay health insurance. My wife is only 60 years old and working part time job and makes about $20,000 a year. I have a 401k of approximately 180,000 that I haven’t needed or touched yet and my wife has approximately $100,000 in her 401k. I know we’re in a low tax bracket because we don’t pay a whole lot of federal taxes and the money we bring in we live comfortable on. My question is should I check in to making a withdrawal from my 401k up to the point that still keeps me in the low tax bracket and even if I don’t need the money I could reinvest it and possibly do it for the next 3 or 4 years before mandatory withdrawal. I don’t really think it would be a whole lot maybe just a few thousand but if it would be tax-free it would help. Thanks John S.
Hi John,
This is a great question. I would consider leaving the money in a tax deferred account for the tax shelter status. When RMDs start they likely won’t be enough to throw you into a higher tax bracket based upon the amount you have. If you aren’t planning on needing the money a potential option with your low tax bracket is to do a Roth conversion so that the money never has to come out because there is no RMDs and it can continue to grow tax free.
Good luck with the finances hopefully this insight will help you. My disclosure is this is not a recommendation but an educational answer for you. Please reach out if you need to discuss what’s best for you more in depth.
Warm Regards,
Nathan Mueller, MBA, CFP(r)
BlackBird Finance
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