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Old 11-09-2017, 09:54 PM   #21
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I believe the 20% Federal Tax withholding for all 401K withdrawals is standard practice, and applies no matter what your age is. Note this is only withholding. If you'll be in the 15% tax bracket during retirement, there's a good chance you'll get half of what was withheld, refunded when you file your tax return.
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Old 11-09-2017, 09:59 PM   #22
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I do what are essentially 72t (life expectancy) withdrawals from my TSP. My understanding is I can change that option in the year I turn 59.5
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Old 11-10-2017, 12:03 AM   #23
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This thread has alerted me that I need to carefully look at the rules for my 457 and 403. But if (as I expect) the rules are favorable, I see no need for a large taxable account and I see significant tax advantages in taking full advantage of tax-advantaged space.
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Old 11-10-2017, 12:28 AM   #24
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OP - do not worry about the 20% tax withheld, as you will get back the overpayment when you file your taxes. No matter what you are going to pay some taxes.

Jumping through the dangerous 72t to try to avoid the taxes would be a poor reason to do the 72t considering the danger if you make a simple $10 mistake during the 5 year minimum dictated by the rules.

It seems like your 401K will allow you to make yearly withdrawals.

For the 20% tax, you can think of it as taking out some extra for the next year, every 2 years.
First year you take out $75K + 19K (for 20% tax)
The second year you will need to take out less as you will have gotten a refund of at least 5K - maybe 10K from overpayment of taxes.
Then the 3rd year you do the $75K + 19K again.
4th year take out less as you will be getting the refund of 5->10K
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Old 11-10-2017, 06:24 AM   #25
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The 20% withholding tax is just a timing difference... a nuisance but nothing to fret about... if there was no withholding then you would need to make estimated payments so within 12 months or less what you pay in tax will be the same whether there was withholding or not.
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Old 11-10-2017, 06:30 AM   #26
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If you have 4 more years until retirement, it is not clear to me why you don't start doing yearly Roth conversions now?

You would still have to come up with after-tax money or rule of 55 for 1st years expenses, but after that, you would be able to withdraw the conversion proceeds tax and penalty free (assuming it has been 5 years since each conversion).

The one wrench in this is that you would need/want to come up with the money each year going forward to pay the incremental taxes on your Roth conversions with after-tax funds.

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Old 11-10-2017, 06:34 AM   #27
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Since they are both now working the marginal tax cost of Roth conversions is probably pretty steep... in fact it might even be more than just paying 10% penalty and viewing it as part of the cost of freedom.... for example if they are currently in the 28% bracket and will be in the 15% bracket in retirement.
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Old 11-10-2017, 02:19 PM   #28
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many think that automatically they get to draw out what they want ,either under the age 55 rule if the plan allows periodic payments or if they 72t but that is not the case .
so how is it determined how much one can withdraw from a 401k using the age 55 rule?
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Old 11-10-2017, 02:21 PM   #29
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Assuming no constraints by the 401k plan you can withdraw as much as you are willing to pay taxes on.
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Old 11-10-2017, 07:14 PM   #30
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so how is it determined how much one can withdraw from a 401k using the age 55 rule?
Google 72t calculator - I use the one at bankrate.com
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Old 11-10-2017, 07:32 PM   #31
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Assuming no constraints by the 401k plan you can withdraw as much as you are willing to pay taxes on.
So let me see if I understand this. As far as the tax rules that say what the taxes are, and whether or not you have the 10% penalty, you can withdraw any amount, any time (after separation).

But the 401/403/457 rules are the rules that may (or may not) restrict what/when/how you can withdraw. It's (heavily) plan dependent.

For planning future ER, while I definitely need to know what the IRS says, I REALLY need to know what my plans say.

Do I have it right?
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Old 11-10-2017, 08:27 PM   #32
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So let me see if I understand this. As far as the tax rules that say what the taxes are, and whether or not you have the 10% penalty, you can withdraw any amount, any time (after separation).

But the 401/403/457 rules are the rules that may (or may not) restrict what/when/how you can withdraw. It's (heavily) plan dependent.

For planning future ER, while I definitely need to know what the IRS says, I REALLY need to know what my plans say.

Do I have it right?
That's the way I see it from all the reading I've done on the subject. I have never seen anything about a formula like a SEPP has or a limit on the amount you can withdraw from a 401k using the age 55 rule. As long as you follow the IRS rules and the SPD work requirements work for your situation everything should be fine. I always question when I read a blanket statement saying otherwise because I figure I missed something.
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Old 11-10-2017, 08:28 PM   #33
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Google 72t calculator - I use the one at bankrate.com
Why would I use a 72t calc if using the age 55 rule? I shouldn't need to.
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Old 11-10-2017, 09:09 PM   #34
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Google 72t calculator - I use the one at bankrate.com
Don't need to calculate if you are 55+ at time of separation from company.

Retirement Topics - Exceptions to Tax on Early Distributions
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Old 11-10-2017, 09:09 PM   #35
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So let me see if I understand this. As far as the tax rules that say what the taxes are, and whether or not you have the 10% penalty, you can withdraw any amount, any time (after separation).

But the 401/403/457 rules are the rules that may (or may not) restrict what/when/how you can withdraw. It's (heavily) plan dependent.

For planning future ER, while I definitely need to know what the IRS says, I REALLY need to know what my plans say.

Do I have it right?
Yep, in that situation myself now.
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Old 11-10-2017, 09:31 PM   #36
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I believe the 20% Federal Tax withholding for all 401K withdrawals is standard practice, and applies no matter what your age is. Note this is only withholding. If you'll be in the 15% tax bracket during retirement, there's a good chance you'll get half of what was withheld, refunded when you file your tax return.
The 20% withholding was kind of a shocker when I heard that from my provider.
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Old 11-10-2017, 09:43 PM   #37
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So let me see if I understand this. As far as the tax rules that say what the taxes are, and whether or not you have the 10% penalty, you can withdraw any amount, any time (after separation).

But the 401/403/457 rules are the rules that may (or may not) restrict what/when/how you can withdraw. It's (heavily) plan dependent.

For planning future ER, while I definitely need to know what the IRS says, I REALLY need to know what my plans say.

Do I have it right?
Yes, you have it right. Assuming that you qualify for the rule of 55 you can take the whole thing out if you are willing to pay the taxes.
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Old 11-11-2017, 02:10 AM   #38
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Apparently what I need to get hold of is the "summary plan description (SPD)". Where do I find it? Who (generally) should I ask for such a thing?
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Old 11-11-2017, 03:47 AM   #39
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Apparently what I need to get hold of is the "summary plan description (SPD)". Where do I find it? Who (generally) should I ask for such a thing?
Most times your HR department, or directly to investment company that handles the account. If your Co. is too small to have an internal HR department they may have the financial help with this.
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Old 11-11-2017, 07:04 AM   #40
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Not sure if a 401K offers the same choices but with my federal TSP plan depending on the type of withdrawal taken you do have the option of waiving the withholding or selecting an amount you want taken out. I have mine setup for monthly withdrawals and no taxes are taken out.
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