• Question
  • Retirement Disbursement Taxes

    Asked by someone from Pullman, WA on 4/20/2017

    Hi, I am about 15 years away from retirement. My current retirement account is held in a
    company ESOP, when I retire this will transferred to a 401k.
    When I withdraw monies for living expenses from that 401k it will be taxed as income.
    Will it still be taxed as income if I re-invest monies from that 401k into govt. treasuries, shares
    bank cds or bank savings accounts?
    I understand there are IRA CDs that I could roll over into without paying taxes are there also
    other IRA equivilants?
    Thanks - Andy

  •  
  • Categories: Taxes, Retirement Planning

Answers

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  • You will be taxed for withdrawals no matter how you reinvest the money.
    Within any qualified (eg. IRA, 401(k) etc.), you can switch securities any way you want without incurring taxes. It's only securities that are outside qualified accounts that are taxed.
    One thing you might consider is rolling over your 401(k) to a rollover IRA and then to a Roth IRA. The rollover to the Roth will require income tax but not taxed thereafter. The latter is only beneficial is you have outside savings that can be used to pay the tax and only if you will have a higher tax rate in retirement than when exchanged--or you plan to leave it to heirs with high tax rates.

  • Login to rate this answer:   Answered on 4/22/2017
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.