Drawing a monthly check from your 401k.

Discussion in 'UPS Retirement Topics' started by brownmonster, Oct 26, 2010.

  1. brownmonster

    brownmonster Man of Great Wisdom

    Has anyone started taking money out of their 401k for it's intended purpose of augmenting your monthly income upon retirement? Can you withdraw it monthly directly form the 401k or does it have to be converted into an IRA first? Any one consider turning it into an annuity so you get a gauranteed check until you die?
  2. rod

    rod retired and happy

    I've been drawing $500 a month out of my IRA for 9 years now. I draw it out of a separate Hartford acct. that was set up just for this purpose. Right now there is just a little less left in it than when I started drawing on it. At the rate it is going down I figure I only have about 45 more years left before it dries up at which time I will be 107 years old and will probably have other things besides money to worry about. Get yourself a good financial adviser----you won't regret it. I've got a couple of retired UPS friends that thought they were smart enought to do their own financial planning and they have pretty much wiped out their savings and are back working full time at crappy jobs just to make ends meet.
  3. raceanoncr

    raceanoncr Well-Known Member

    That's what I was doing BEFORE I retired!!!!!
  4. mattwtrs

    mattwtrs Retired Senior Member

    A good financial adviser is worth their weight in gold. A few years ago his advice saved me almost $20,000 in taxes to the IRS.

    We talk every couple of months and meet once a year. He usually asks if I need any more of my money in my monthly check. I tell him not yet.

    I am not withdrawing any 401K or IRA money yet. Those checks will be my cost of living increase in a few years if needed.

    I am a few years away from SS so a good plan seems to be working.
  5. FWIW

    I would roll the 401k to an IRA as soon as possible after separating from the company. There are just too many negatives about keeping it in the 401k.

    You have thousands of more choices on the ways to invest in an IRA. Mutual funds, individual stocks, bonds, even just holding it as cash. More choices.

    The 401k doesn't provide for a cash position, except in the self managed account.

    Withdrawing money from an IRA in retirement is easy as a phone call or click.

    I'm not interested in annuities. There are many types and are sold by insurance companies, which should be your first caveat.

    Be sure to understand completely, any financial instrument before participating in it. You should be able to tell some one else how it works and have them completely understand it.

    Not interested in the size of your nest egg, but a $500,000 egg invested in a series of mutual funds earning an average of 8% over a 20 year or more history would provide an annual income of $40,000 without ever touching the egg. Now, I like that "annuity".

    Good luck in your retirement, must be coming soon ...... just like mine.
  6. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    CYCB, thanks for the info. Are they are tax consequences from rolling the 401k in to a traditional IRA? I know that there are if you roll in to a Roth.
  7. grgrcr88

    grgrcr88 No It's not green grocer!

    Tell me, What did you do as an active employee to accumulate your retirement nest egg? Strictly 401k, desp, or some other form of investing?
  8. brownmonster

    brownmonster Man of Great Wisdom

    Your amount is the goal I hope to reach with the wifes and mine combined at retirement. The 8% a year sounds great but 500K invested in the market in 1999 would be worth 4 something now. Hope the next decade is a little closer to the historical average.
  9. brownmonster

    brownmonster Man of Great Wisdom

    Rod, at what age did you start withdrawing from the IRA? Didn't you just turn 62 recently and start collecting SS?
  10. rod

    rod retired and happy

    I rolled my 401K over as soon as I retired when I was 53. I started collecting from my IRA about 5 months later. I started collecting SS May of this year at 62.
  11. Coldworld

    Coldworld Taking it all back.....

    Two thinks that are going to make the biggest difference down the road are 1. if your house is paid off or almost paid off..thats a huge chunk of change that you can put toward other things during retirement...like cruises!!! 2. is health care monthly premium and just overall health of the retiree in general...sucks having to go into doctor every other month for something, although some of this might not be in direct control of person...some of it is..something to keep in mind for all of the upsers who like to jump out of pkg cars and not use handtrucks for heavy pkgs...knee surgery or herniated disks cant be fun now or into the future.
  12. There are zero tax consequences if you "sweep" the 401k to the IRA. You must not take custody of the money, even for an instant. The money must transfer directly to the IRA. Just a bunch of paperwork.

    It is likely some or all of your 401k holdings will have to be liquidated to cash in order to transfer. The positions in most 401k's are proprietary, meaning those particular holdings only exist under the umbrella of that particular institution.
    For example, a time horizon fund geared towards a specific year for retirement won't exist in the IRA you want to transfer to, so that position must be liquidated in the 401k for the transfer. Then you can re-establish a similar type of holding in the IRA if you want.

    Having a self-directed IRA requires a more hands on approach, rather than a 401k that is pretty much on auto pilot. I personally want COMPLETE control of my money, and not be limited by what is offered under a UPS/Teamsters plan. Again, my favorite are mutual funds that have been around for a long time (15 years or more) and their performance history shows an average of 8% during that time. I just ran a quick screen for funds falling under my parameters and found several dozen without digging much. This one based on fixed income has an inception date of 05/11/1987 and has averaged 8.61% annually. Another, small cap equity fund founded on 10/01/1991 averages 12.28%. I'm not making these up, these are real.

    Just remember, don't do anything you don't understand. YOU must understand, after all, it is your money.

    A good financial advisor would be a good follow up for anything you learn here.
  13. brownmonster

    brownmonster Man of Great Wisdom

    You were able to start drawing on your IRA before age 55?
  14. Monkey Butt

    Monkey Butt Dark Prince of Double Standards Staff Member

    That is a common misconception ... one can start drawing on their 401k or IRA as early as 52 (maybe earlier) but you have to commit to the same withdrawal until age 59 1/2.
  15. rod

    rod retired and happy

    Correct----At 59 1/2 I jacked it up from 500 to 600 bucks.
  16. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Rod, I have to apologize to you. You seem to have a firm grasp on your finances. I never knew you could start taking withdrawals from your 401K as early as age 52. Dave.
  17. brownmonster

    brownmonster Man of Great Wisdom

    I don't hit my 30 years until I'm 58 so I'm intersed to see if we can get at our 401k money and possibly get out early. Lot's of good info here.
  18. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Keep in mind your medical benefits---here we have to do all 30 to get ours paid for by the union.
  19. brownmonster

    brownmonster Man of Great Wisdom

    We have to pay even after 30. I'll look into those details in about 5 years. I'm sure it will be a whole new world by then.
  20. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    We pay too but not the full amount.