401k Tax Free Withdrawal

Keep your tax bracket low

You can do this by withdrawing from your 401(k) up to your upper limit.

Consider moving your savings to Roth

If you anticipate that your earnings in retirement will fall in a higher tax bracket, consider moving the savings to a Roth account.

Consider borrowing from a 401(k) instead of withdrawing

The borrowed amount is not subjected to ordinary income and doesn’t attract an early withdrawal penalty if it follows the IRS guidelines.

Defer taking your Social Security benefits

If you have already made a 401(k) withdrawal, consider deferring your Social Security benefits to ensure that you remain in a lower tax bracket.

Avoid early withdrawal penalty

When you withdraw from your 401(k) before age 59 ½, you are subjected to a 10% early withdrawal penalty plus income tax.

How Can I Get My 401(K) Money Without Paying Taxes?

Donate your distribution to a qualifying charity

You can avoid paying tax by rolling over your funds to an IRA and donating the distribution to a qualifying charity.

Rollover your 401(k) into another 401(k) or IRA

Roll over your 401(k)s with your previous employers into your current 401(k) before you turn 72.

Get disaster relief

The IRS offers a waiver in case of hardship withdrawals such as putting a downpayment for your primary residence mortgage, difficulty in paying college tuition, job loss, etc.

Consider tax-loss harvesting

Tax-loss harvesting can offset all or some of your tax burden generated through a 401(k) withdrawal.