401K retirement distribution

[Gentleman142]

I have a 401k with 350k. I am 61 and want to start withdrawing every month. Is there a calculator to use? What percent of the balance am I able to withdraw every month and still have a balance in 25 years?

[C. B. Zeller]

It's impossible to know, because it will depend heavily on the interest rate. If your account is gaining 5% a year it would be very different than if it were gaining 2% a year.

One thing you could do, if you know you want to take a withdrawal every month for exactly 25 years, that means you will have 12 x 25 = 300 total withdrawals. In the first month, take 1/300th of the account, in the second month, take 1/299th of the remaining account, and so on. The amount of the withdrawal will fluctuate with the gains or losses in the account each month but it will be approximately level.

Another option is to look into using your account balance to purchase an annuity.

[FORMER ESQ.]

To add to the above (and state the obvious), make sure that your 401(k) plan allows for installment payments that you describe and that you are eligible to begin receiving distributions from the plan.

[FORMER ESQ.]

19 minutes ago, FORMER ESQ. said:

To add to the above (and state the obvious), make sure that your 401(k) plan allows for installment payments that you describe and that you are eligible to begin receiving distributions from the plan.

Sorry, did not see that you are 61 years old. Just make sure your plan allows for installments. 

[QDROphile]

Also, the plan may have a formula for providing installments and might not allow whatever schedule you would devise.

[Bird]

I agree with previous comments.  I'd add that most, just about all, people in this situation would roll the money to an IRA and then take distributions from the IRA; generally much easier.  As noted, the 401(k) might have restrictions on payouts and also might charge a fee each time.

Honestly, it's a very complicated discussion without simple answers; well beyond the scope of this forum.  Investment options and fees, direct and indirect, are all critical (within the plan vs. within the IRA and to get into the IRA).

[Gentleman142]

This will be a QDRO distribution.  So it would be better to open an IRA and have the funds moved into that account instead of my 401K?

[Bill Presson]

Just now, Gentleman142 said:

This will be a QDRO distribution.  So it would be better to open an IRA and have the funds moved into that account instead of my 401K?

If it's a QDRO, you have to do whatever the QDRO says, so that might limit the choices. If you are the alternate payee, many times you can just take a complete distribution and set up your own payment schedule. But if the QDRO awarded you installment payments, that's what you'll likely have to do. Too many variables for advice here, I think.

[Gentleman142]

I am receiving a lump sum from a TSP if that helps.

[FORMER ESQ.]

12 minutes ago, Gentleman142 said:

This will be a QDRO distribution.  So it would be better to open an IRA and have the funds moved into that account instead of my 401K?

That was an important detail you left out. As Bill Presson stated, you will likely have to do what the QDRO says.

[david rigby]

1 hour ago, Gentleman142 said:

I am receiving a lump sum from a TSP if that helps.

Not sure what "TSP" means.  If it refers to a government-sponsored plan, note that QDRO specs apply only to the extent that the plan itself adopts such provisions, or recognizes the process (perhaps referring to a "court order" rather than "QDRO").

[Luke Bailey]

9 hours ago, david rigby said:

Not sure what "TSP" means. 

Federal gov't Thrift Savings Plan, most likely, david rigby.

[Dan]

It would make sense to talk with a financial planner about your distribution options. There will be a cost, but you should have some comfort in speaking with someone who can help you get started on the right track.  the cost would be far less than making decisions that in hind-sight were bad ones and could have been avoided.  Don't talk with someone who will advise for free and/or wants to sell something to you. Go to a fee-only financial planner. 

[Bird]

15 hours ago, Dan said:

Don't talk with someone who will advise for free and/or wants to sell something to you. Go to a fee-only financial planner. 

There are fee-only advisors who charge too much and commission-based advisors who will do a good job and not "charge" (receive) too much.  Granted, it is tough for a layperson to know what is "reasonable" and what is "too much" but I don't subscribe to the mantra that fee-only is always better.  It's not unfair to ask exactly how much either party is charging and/or receiving.