Need info

[jbeam44]

I,m 56. want to retire next April. Will get 525k lump sum retirement. Also have 325k in 401k. I want income the moment I retire. Do not want to leave any money, except to my wife (beneficiary) when I am gone. NYS resident.

[youbet]

What kind of info are you looking for?

[jbeam44]

tax implications before 59 1/2? how much can I take out? 72t? keep them seperate or roll over into one?

[pb4uski]

Some 401k plans allow penalty free withdrawals for employees who are 55 or older at the time they leave the company. I would check to see if your 401k plan allows this. If so, you could utilize the 401k until you get to 59 1/2 and then tap your rollover IRA.

see Early Retirement Planning: Taking Early Withdrawals Without Penalty From Your 401(k) or IRA » My Money Blog

Otherwise, taxable accounts and/or 72t are your best options.

[marko]

If the $500K lump sum is from a pension plan, your soon-to-be-former company should automatically deposit it into your 401K. (that's what mine did).

From there, its up to you taxwise.

If you have no other post tax assets, I"d look into options as pb4uski suggests.

[Animorph]

Are you expecting SS or any other income? Any help with healthcare? Otherwise you have about $850k, so your yearly withdrawal (including any dividends) from your portfolio should be kept below $25.5k to $34k (3% to 4% of portfolio) depending on how optimistic you feel. That very roughly assumes something close to 50% equities, not all bonds or cash. You should probably have a couple years or more of living expenses in cash or short-term bonds now, to carry you through any market downturns ($525k kind of covers that for now!).

[Katsmeow]

Quote:

Originally Posted by marko If the $500K lump sum is from a pension plan, your soon-to-be-former company should automatically deposit it into your 401K. (that's what mine did).

When DH retired he took a lump sum from a pension plan and it never went into the 401(k). It went direct to an IRA. I'm not sure if it could have gone into the 401(k) or not which might be important for tax implications. My understanding is that under some circumstances if you retire after 55 you can withdraw from a 401(k) -- but not an IRA -- without penalty (of course, you have to pay taxes). The other alternative is the 72t.

[obgyn65]

This is my understanding also 401(k) - Wikipedia, the free encyclopedia

Quote:

Originally Posted by Katsmeow My understanding is that under some circumstances if you retire after 55 you can withdraw from a 401(k) -- but not an IRA -- without penalty (of course, you have to pay taxes). The other alternative is the 72t.

[frayne]

Quote:

Originally Posted by marko If the $500K lump sum is from a pension plan, your soon-to-be-former company should automatically deposit it into your 401K. (that's what mine did). From there, its up to you taxwise. If you have no other post tax assets, I"d look into options as pb4uski suggests.

I am pretty sure you mean IRA and not 401K, or am I missing something ?

[marko]

Quote:

Originally Posted by frayne I am pretty sure you mean IRA and not 401K, or am I missing something ?

At the time it happened to me I was still employed for a few more weeks, so it went to my 401--soon to become IRA.

But, you're right.

My point was to try and get it into a tax exempt location rather than a taxable payout.

[rothlev]

Roll it into the 401k and find out if you can take distributions from there, without the 10% penalty because you separated after 55, this is often allowed. The 72T is much more complicated and to be avoided if possible. ( if you roll into an IRA your only option is a 72T to avoid the tax penalty)

Tax wize your income from this will be taxed at your ordinary tax bracket. Subtract out your exemption and standard deduction or itemized. Do you know what income amount you are looking for? Any other projected income? SS ? when?

[rothlev]

Otherwize , if you have to roll it into an IRA , I would use the 401k money first if allowed by your company. (w/out penalty) Once you hit 59 1/2 then you can withdraw from the IRA.

[easysurfer]

Quote:

Originally Posted by jbeam44 I,m 56. want to retire next April. Will get 525k lump sum retirement. Also have 325k in 401k. I want income the moment I retire. Do not want to leave any money, except to my wife (beneficiary) when I am gone. NYS resident.

Was having the 525K in lifetime payments instead of lump sum a consideration? That would allow for income stream the moment you retire.

[jbeam44]

My thought was to roll over the 525K, I don't need that money right now, if i can withdraw from my 401 without the 10% hit.

[pb4uski]

Quote:

Originally Posted by jbeam44 My thought was to roll over the 525K, I don't need that money right now, if i can withdraw from my 401 without the 10% hit.

Just make sure that you plan allows those who have left the company after age 55 to do penalty free withdrawals, not all plans do (which has always been a bit confusing to me why some do and some do not).