As more Americans approach the age to retire, it pays to
review when to take the required monthly distributions. US Media Studios shares
retirement fund tips.
Monthly 401(k) Distributions
In most circumstances, the soonest someone can start receiving
monthly distribution from their 401(k)
account is at age 59 ½ without being taxed an extra 10 percent early withdrawal
penalty. It’s also beneficial to know
that there is no 10% penalty tax if someone retires early because of a
qualifying disability or can claim financial hardship. But generally speaking,
the US IRS says minimum monthly distributions from a 401(k) must start April 1
following the later of the calendar year when a worker reaches age 70 ½ , or
they retire. There are other exclusions too. Take time to review the rules for
retirement monthly distributions in your plan.
IRA Accounts
Workers who have an IRA must start taking the required
monthly distributions once they turn 70 ½ . But if a worker is still working
and doesn’t need the income, it’s best to roll the IRA into a 401(K), if the
plan allows it. An exception to this rule relates to Roth 401(K) plans. The
monthly distributions are tax-free since they the deposits should have been
treated as taxable income while working.
The Four Percent Assumption
The old assumption that a four percent yearly withdrawal
would be the perfect amount to add to any other retirement income is a bit
outdated for today’s older working and soon to retire employees. Inflation is
higher than it was back in the early 1990s.
Today, retirees could need more than a four percent withdrawal rate. US Media Studios notes that the four percent assumption would net a retiree less
than they need make ends meet, and would need to be adjusted up, meaning less
money in retirement accounts to carry a retiree through several decades of
retirement.
In Closing
As financially challenging as it can be with the economy,
high prices and jobs outlook today, it pays to deposit as much money as one
possibly can into 401(k) and IRA retirement accounts. Many small to medium-sized
employers have already stopped matching funds. Keep on adding funds to
retirement accounts. Try not to take any withdrawals until absolutely
necessary. If financial advice is needed, ask a trusted friend for a referral,
a financial institution, veterans’ organization, or a representative from the retirement
plan you have now.
