Do I Have To Pay Taxes On My 401k After Age 65?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Do I Have To Pay Taxes On My 401k After Age 65?

Yes, you must pay taxes on your 401k withdrawals at any age. This applies to traditional 401k plans, as they are funded with pre-tax dollars. When you withdraw money, it’s treated as ordinary income and subject to income tax.

Required Minimum Distributions (RMDs) Start at Age 73

Beginning at age 73, you are required to start taking minimum distributions from your 401k. These RMDs are also taxable as ordinary income.

Roth 401k Exception

If you have a Roth 401k, withdrawals are tax-free, provided certain conditions are met. This is because contributions to a Roth 401k are made with after-tax dollars.

Option: Rolling Over into a Deferred IRA Annuity

You have the option to roll over your 401k into a deferred IRA annuity. Some annuities offer a premium bonus, which can be seen as “free money.” This bonus can help offset some of the taxes owed on withdrawals.

401k Withdrawal Options and Tax Implications

Age RangeTraditional 401k Tax ImplicationRoth 401k Tax Implication
Under 59½Taxable + 10% penalty (exceptions apply)Contributions tax-free, earnings subject to tax + 10% penalty
59½ to 72Taxable, no penaltyContributions are tax-free, earnings subject to tax + 10% penalty
73 and overTaxable, required minimum distributionsTax-free (if the account is at least 5 years old)

Conclusion

Understanding the tax implications of 401k withdrawals, especially after age 65, is crucial for effective retirement planning. Whether you have a traditional or Roth 401k, each has different tax treatments. Rolling over into a deferred IRA annuity with a premium bonus is an option to consider for potentially offsetting taxes. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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