Tax consequences of liquidating a 401k
These strategies, now slated to end April 29, 2016—six months after President Obama signed the budget into law—provide many middle class families financial support while waiting to maximize their eventual benefits.File and suspend has also been used by individual filers so that they can claim a future lump sum, and by families claiming dependent or disabled child benefits who wish to allow individual credits to grow to age 70.So, consider the example of a married, higher-earning individual, eligible to be grandfathered in, who manages to file and suspend before the upcoming deadline.If that individual’s spouse is, say, 63 now, he or she will be eligible to start collecting a spousal benefit by itself.The reason why you should take your tax-deferred first is most people should delay Social Security.” He adds, “It’s better to liquidate your 401(k) and delay Social Security than it is to maintain your 401(k) and take Social Security early.
“For somebody to live till 92 they’re going to get …
Tapping 401(k)s First“The rules of thumb about how to draw down are completely backwards,“ says Meyer.
He says retirees have learned to take withdrawals from taxable accounts first, from tax-deferred savings such as a 401(k) second, and from tax-exempt sources such as Roths last.
I would say what (Congress) just did is make that a more challenging task.”The Congressional decision underscores the value of Social Security, which William Meyer believes will dominate retirement planning over the next five years. provides consulting and software for claiming strategies, says he and William Reichenstein, CFA, the company’s head of research, found that delaying Social Security benefits to age 70 extends portfolio life an average of seven years, in some cases up to 10 years.
According to Reichenstein, Social Security is especially useful in extending the portfolios of middle class retirement investors.