I'm 60, retired, and have $2 million in my 401(k). How do I plan my withdrawals in a way that minimizes taxes?

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Christy Bieber

Wed, Mar 19, 2025, 4:25 AM 4 min read

You tin commencement taking wealth from your 401(k) penalty-free astatine property 59 ½. So you shouldn't beryllium penalized if you are 60 and opening to retreat wealth from your status plans. However, you volition inactive beryllium taxed astatine your mean income taxation rate, truthful you’ll privation to research ways to trim the burden.

Here are a fewer options.

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Traditional 401(k) accounts let you to put with pre-tax dollars, but withdrawals are taxed. Roth accounts enactment differently, arsenic you put with after-tax wealth and don’t wage taxes connected the wealth you instrumentality out.

If you are acrophobic astir entering a higher taxation bracket successful aboriginal years oregon triggering higher Medicare premiums, particularly erstwhile Required Minimum Distributions commencement astatine 73, see converting the relationship to a Roth IRA. This could beryllium done by rolling implicit the wealth to a Roth IRA erstwhile you permission your job.

While this has taxation consequences, arsenic you volition beryllium taxed connected the converted funds, you tin beryllium strategical astir erstwhile you bash a conversion. You whitethorn privation to person tiny amounts astatine a clip to enactment successful a little income taxation bracket oregon program your conversion for a twelvemonth erstwhile your income is low.

Keep successful caput that a five-year regularisation applies aft a conversion. That is, if you retreat immoderate net wrong 5 years of moving the wealth into your Roth, you whitethorn beryllium taxes connected the withdrawal. However, you tin retreat your contributions without taxes oregon penalties astatine immoderate time.

If you already trust connected your 401(k) to supply income, oregon volition successful the coming 5 years, a conversion whitethorn not enactment for you.

Read more: An alarming 97% of older Americans are carrying indebtedness into status — here’s wherefore and 4 elemental things you tin bash if you’re stuck successful the aforesaid situation

Don’t conscionable commencement withdrawing wealth from your status accounts. You request to beryllium strategical astir withdrawals. Otherwise, you could look overmuch higher taxes if you person to retreat a batch of wealth erstwhile Required Minimum Distributions (RMDs) begin.

Some experts urge exhausting taxable accounts archetypal portion allowing tax-deferred accounts similar a 401(k) to support growing. However, depending connected however overmuch wealth you person coming from different sources and however overmuch your RMDs volition be, it whitethorn beryllium amended to instrumentality regular withdrawals from aggregate accounts passim retirement.