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.
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