"It's important to recognize that 401(k) withdrawals in retirement are taxable. Increasing your taxable income could also mean facing taxes on Social Security and higher Medicare premiums. A Roth 401(k) can help you avoid having to worry about taxes on withdrawals in retirement. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests."
"The purpose of building a retirement nest egg is to have money to spend later in life. But it's important to manage your 401(k) plan withdrawals carefully for a few reasons. First, if you take too much money out of your 401(k) early on in retirement, you risk not having enough later on. Secondly, because 401(k) withdrawals are taxed, taking a huge lump sum from your savings could leave you owing the IRS a large amount of money."
Building a retirement nest egg ensures funds for spending later in life. Careful management of 401(k) withdrawals is necessary to avoid depleting savings too early. Large withdrawals increase taxable income, potentially raising marginal tax rates and triggering taxation of Social Security benefits. Substantial distributions can also trigger IRMAA surcharges on Medicare Part B and Part D premiums for higher-income retirees. Having taxes withheld from a 401(k) distribution can mitigate immediate tax liability but may not prevent long-term consequences. Converting or contributing to a Roth 401(k) allows tax-free qualified withdrawals in retirement, reducing future tax exposure on distributions.
Read at 24/7 Wall St.
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