Withdrawal from retirement?

Hi, My husband is retired and has 3 retirement plans, one being 401k and one is a 457b. We need to withdraw around $30,000 and were wondering the best way to go about it. I know with the 457b, we wouldn’t have the 10% penalty, but other than that what is our best option in regards to taxes and penalties?

There’s no way for anyone to answer that (even poorly) based on the information you’ve given. As a start, it would be helpful to know:

What his other retirement plan is
Roughly how much each plan has in it (or pays out monthly)
If he gets social security
How old he is
How old you are
If you have income
If the two of you have debts

There may be other information that would also be helpful, but start with those.

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Thank you for your reply. I was simply asking (as we have been searching information) what the penalties and taxes are when withdrawing from a 457b and 401k and if there are disadvantages in withdrawing from one over the other in general terms. Regardless of how much is in each, what we currently bring in, age, debts, etc… what are the taxes and penalties in general for anyone looking into this?

Good luck to you in your quest.

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At minimum, ages are necessary to even attempt an answer since the most common penalties are age based.

For a 401k and 403B, I believe if you separate service before 55, you must wait till 59 1/2 or are subject to a 10% penalty. If you wait till 55 to separate from service, I do believe that you can withdraw penalty free but If you are working, you must wait to 59 1/2.

If you are not subject yo the 10% penalty, don’t transfer to an IRA or RothIRA because then you must wait to 59 1/2. Also you must avoid doing a rollover. For instance if you rollover $40,000, your employer will send you a $32,000 check and $8,000 will be applied to your tax bill but to complete the rollover tax and penalty free, you must put $40,000 into the IRA within 60 days (without exception) and then you must wait to 59 1/2 to withdraw from the IRA.

Why you need to see a tax advisor?

  1. You separated service between the ages of 55 and 59 1/2 and need to take some $$$ from the 401k or 403B or any age for 457 with the remainder being transferred to an IRA. As mentioned before avoid doing indirect rollovers.

  2. You need to use 72-T in regards to IRAs.

  3. You can rollover $$$ from an IRA to a 401k

  4. you are in a special purpose job that mandates early retirement

  5. you have net unrealized appreciation tax treatment - company stock - an ESOP plan

  6. your employer allows non-deductible 401k contributions and also allows you to convert this $$$ to a Roth 401k - an in service conversion

  7. you are granted stock options

  8. you want to check for exceptions to the 10% penalty before withdrawing money

  9. to make sure to get advice before you make an irrevocable decision

  10. just because you need to know the tax rules and to make sure you transfer $$$ appropriately

And you may also want to check:

How a distribution might affect social security

If you want to convert $$$ from a Traditional account to a Roth account such as to plan ahead for RMDs

If you are changing states or to see if your state has an exemption for retirement accounts

To check on how having assets might affect your need for welfare or subsidized housing

How withdrawing might affect your kid’s eligibility for financial aid which may increase student loans

How to decide which taxable accounts to tap from, which pretax accounts, and which after tax

To see if you should use a QLAC annuity or an immediate annuity or deferred income annuity

A direct rollover to an IRA goes from institution to institution without taxation. It is only if you act as an intermediary that tax is withheld, and it is only 10%, which is probably insufficient. You cannot take the rest of the required tax from the distribution…you must supply it from elsewhere. I can’t say how direct rollover from non-Roth to Roth works, as it is not something with which i have dealt.

The last time I heard there was a 20% withholding and a 10% penalty

You’re correct, it’s 20%

I have used both a 72-T and a Solo-401k to withdraw funds from my traditional IRA. The 401K was set up for a couple hundred dollars; I am the only employee and was limited to $50,000 withdrawal which I needed to start paying back right away.