Why Not Just Take It All Out Now?

If you’re over the age of 55 and you’re not working anymore or are over 59 and a half, regardless of your employment status, you can take out your total account balance in one lump sum.

But this isn’t a very good idea, particularly if you have a considerable amount of money in your 401(k).

Besides losing your creditor protection, you could take on some severe tax consequences because the money you withdraw from a plan will now be considered taxable income.

For instance, if you have more than $418,400 in an account, a lump sum withdrawal could put you in the highest tax bracket, which is 39.6% for this year. This could be a severe and unnecessary blow to your retirement savings.