Should You Wait to Withdraw Retirement Funds

As retirement looms, an important question — besides whether you have enough to even think about retiring — is should you wait to withdraw retirement funds.

Should you wait to withdraw retirement funds

Here’s an example:

My wife and I are both retired. We both have pensions and draw Social Security, and these combined funds meet our current expenses. So far we have not needed to withdraw anything from our taxable retirement and 401k plans. We’ve been in the 15% tax bracket. Should we withdraw now at a lower rate or wait until we have to make the required minimum distribution at age 70 1/2, possibly paying taxes at a higher rate? What questions do I need to think about to make this decision one way or the other?

Should you wait to withdraw retirement funds or start taking them now? The answer depends on several things:

  • Is your tax rate likely to be lower in the future?
  • What deductions do you have that reduce your taxable income?
  • What are potential changes to the tax code and how might they affect your rate?
  • What is your life expectancy and that of your beneficiaries?

Should you wait to withdraw retirement funds? How you answer these — and other — questions will help you determine the right approach for you.

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