Early withdrawals from a 401(k) before age 73 do not count towards Required Minimum Distributions

From Yahoo Finance: 2025-04-13 08:30:00

Taking early or larger withdrawals from a tax-deferred retirement account like a 401(k) won’t directly reduce future mandated distributions. However, it could indirectly impact compulsory distributions due to reduced account balance. Strategies like transferring funds to a Roth account or buying annuities can help delay or eliminate RMDs.

Regular withdrawals from a tax-deferred account like a 401(k) typically require paying income taxes. Required Minimum Distributions (RMDs) start at age 73, preventing indefinite tax-free growth. Pre-RMD withdrawals do not reduce future RMD amounts, but can lower future balances subject to RMD calculations.

Withdrawals taken before or in excess of RMD amounts can decrease the account balance used for RMD calculations. Lower balances often mean lower RMDs, making it beneficial if in a higher tax bracket post-retirement. Strategies like annuities, Roth conversions, or continued employment can help reduce, avoid, or delay RMDs.

Delay RMDs by working after retirement with the employer-sponsored 401(k) plan or using Qualified Lifetime Annuity Contracts (QLACs). Converting 401(k) funds to a Roth account or strategic withdrawals can also help avoid RMDs. Consult a financial advisor for personalized retirement income strategies.

Using special annuities or Roth conversions can help reduce, avoid, or delay RMDs. While these methods have tax implications, they offer flexibility in managing retirement funds. Consult a financial advisor to tailor a strategy that aligns with your financial goals and circumstances.



Read more at Yahoo Finance: Do Early Withdrawals From a 401(k) Count Toward My RMDs Before Age 73?