What is the Tax Rate for Withdrawing from a 401(a) After Age 59½?

Shawn Plummer

CEO, The Annuity Expert

Understanding 401(a) Withdrawals After 59½

When you withdraw from a 401(a) plan after the age of 59½, the tax rate applied to your withdrawals is based on your current federal and state tax rates. It’s important to understand that 100% of the amount you withdraw is considered taxable income.

Key Points

  1. Taxable Income: Withdrawals are taxed as ordinary income.
  2. Federal Tax Rate: Depends on your income tax bracket at the time of withdrawal.
  3. State Tax Rate: Varies based on the state’s tax laws where you reside.
  4. No early withdrawal penalty: After 59½, there is no 10% early withdrawal penalty.

Example

  • If you are in the 22% federal tax bracket and your state tax rate is 5%, your total tax rate on the withdrawal would be 27%.

Conclusion

Withdrawing from a 401(a) after age 59½ subjects your withdrawals to your current federal and state tax rates. It’s crucial to understand your tax bracket to estimate the taxes on your withdrawals accurately. For personalized advice and a more detailed breakdown, it’s recommended to consult with a tax professional.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, 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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