Quote:
Originally Posted by AlmostSeniorinNJ
One thing I am confused about with an old 401k from a company I no longer work for is: If I wait until some point beyond 59 1/2 y.o. (at 65 years old for example), to draw out the funds and do not roll it over, do I avoid taxes completely?
I know I need to wait until 59 1/2 to avoid the 10% penalty, but I am not sure if I benefit by keeping the money in the account for a period beyond that and draw it out later tax free. I would rather have the cash as opposed to putting it into an IRA when the time comes.
|
That is pretax money, so if you withdraw after age 59.5 you will avoid the 10% early withdrawal penalty, but you will be required to pay taxes on that money. If you roll it over to a similar account, when you begin to withdraw it you will still have to pay taxes on it.
And just to add to this, when my father passed I inherited $45,000 from his employment 401K account. I rolled that money into my own TSP/401K account. Although it is now lumped in with my own contributions I will still pay taxes on it because my father did not when I begin to withdraw it. My sister who was already retired when my father passed also inherited $45,000 from my father's 401K. She chose to take a full cash withdrawal and I believe 20% was taken out in taxes and she was sent a check for the balance.