There are several ways to avoid the 20% federal withholding. First and foremost, it doesn’t apply to RMDs. It also doesn’t apply if you are over 59 1/2 and are taking equal monthly withdrawals. You can have withholding, but it’s not mandatory. Other ways are a bit more complex, which is why it’s generally a good idea to roll your 401K to an IRA once you fully retire, unless you have a fantastic 401K. Also, for RMDs, you have to calculate the amount necessary to withdraw for IRAs and 401Ks separately. You can combine all the IRAs and take your RMD from any single one or all of them. But each 401K is treated as an independent account. Makes life more complex.