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    BellKJ's Avatar
    BellKJ Posts: 2, Reputation: 1
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    #1

    Feb 18, 2011, 04:21 PM
    Withdrawing from 401K
    I'm 59-1/2 and would like to start taking money from my 401K. Can I set up monthly installments? Or what is my best option?
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    Feb 21, 2011, 07:04 AM

    Assuming you are retired (or at least no longer an active employee at the company where the 401(k) is located) - yes, you can set up a monthly withdrawal plan. Your 401(k) plan administrator should be able to help you set that up. Give them a call.

    As for what's the "best option" - it really depends on your personal needs. It sounds like you would like a steady stream of monthly income from your 401(k). One option to consider is to use a portion of your 401(k) to buy a single payment immediate annuity. This gives you a guarranteed monthly payment as long as you live in exchange for a single up-front payment by you. So it's sort of like getting a pension. Not knowing how much you have in your 401(k) - you might consider using half the value for this annuity, and keep the other half in the 401(k) to use as a rainy day fund or in case of financial emergency.
    BellKJ's Avatar
    BellKJ Posts: 2, Reputation: 1
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    #3

    Feb 24, 2011, 09:05 AM
    Comment on ebaines's post
    I was told my plan doesn't allow monthy installments until age 701/2. I don't have enough money for the single payment immediate annuity. Only around 60K. All I really need for extra money is around 1,000 monthly for a couple of years. Can I roll over to a traditional IRA and then get monhly payments? Or would I better off just doing a lump sum from 401K?
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #4

    Feb 24, 2011, 09:41 AM

    BellKJ: first. To ask follow-up questions please do not use the "comment" feature, but rather you should use the "answer" box.

    You could go a couple of different ways here:

    1. Request withdrawals from your 401(k) whenever you need them. This may be a bit of a pain because it's not automatic. You would need to ask whether there are limits as to how often you are allowed to take distributions.

    2. Roll your account to an IRA, obviously one that offers an automatic payout feature. All plans will set up automatic distributions if you are age 70-1/2 because the IRS has rules for minimum required distributions when you reach that age. But you'll have to ask whether they have a similar feature for people under age 70-1/2. I know that Fidelity does, and I would bet most major companies do as well. The advantage to rolling to an IRA is that you should be able to find a good IRA that has very low fees and provides much more flexibility in terms of investments and withdrawals. Check out companies like Fidelity, Vanguard, T Rowe Price, Schwab, etc. In general my advice is to stay away from IRAs offered by your local bank or insurance companies - they tend to be more expensive with poorer service - but do shop around. And when you do the rollover make sure it's a direct rollover - your IRA provider handles all the paperwork and it avoids the hastle and potential terrible tax consequences that can come if you take a distribution from your 401(k) and use it to fund an IRA yourself.

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