My goal is to live off the interest (5% or $50k per year) from my 401k savings ($1m) when I'm 50 for 12 years without reducing the amount of my 401k savings.

I'm sure its not as simple as withdrawing the interest the $1m will earn, what should I be concerned with.

Thanks

First, you can't do that. If you withdraw the funds prior to age 59 1/2 you will incur a 10% penalty. You can roll over the distribution into an IRA, but I'm not sure what the withdrawal rules on that are. Even in the 401K there are some rules about minimums that you can withdraw annually after 59 1/2. The rules are fairly complex.

Also distributions from a 401K are taxable in the year made. So are you considering the $50K as gross or net?

A 5% return is not out of line though. If your 401K is not giving you that return, you should be able to rollover into an IRA to get that return. But again, you can't start withdrawing until 59 1/2.

If your 401K is more than $1 mill and you can clear that much after penalty and taxes, then you can invest it however you want (I'd suggest tax free munis) that pay a quarterly dividend.

I for sure am no expert. But I just rolled my 401K into an IRA and about 5 Holdings. I did have to draw out money on 2 occasions. Both withdrawals we considered income and taxed accordingly. I did not have to pay the penalty because I am disabled. Hope this helped.


Jim