I am 64 and retired (as is my wife) and living on our social security plus some support from investments. We have not taken anything out of my 401K yet and wondering weather we should to avoid being in a higher tax bracket if we wait until 70.5 when the minimum has to be taken out. Is the minimum affected if you start withdrawals earlier than 70.5?

The law requires that you begin takling minimum withdrawals starting with April 1 of the year you reach 70.5. The minimum is a complex calculation based on life expectancy, other retirement income and balance. Therefore, if you started taking amounts out of the 401K prior to 70.5, you would be reducing the minimum you must take at that time.

I would strongly suggest you discuss this with a tax specialist or estate planner who can advise whether the minimum would throw you into a higher tax bracket.

I am in a similar situation. I am now 65, and feel we will all be paying higher rates in 5 to 6 years. I have gone through this same questions and still seems like with 6 years in your case to let it grow interest free you are probably better off waiting until you are 70 1/2. As was suggested you can talk to a tax person, but like us they don't know what rate we are going to be paying in 5 or 6 years. I am sure my tax bracket will go up, but I am just going to ride it out.

One of the principles behind 401Ks was to defer tax liability to a time when your tax bracket would be lower. The assumption was that people would be living on less taxable income when retired so their tax bracket would be lower.

While it certainly is probable for tax rates to rise, some of your retirement income may or should be sheltered from taxation. Its also unlikley that tax rates would rise at a rate to wipe out investment gains.