We know saving for retirement is a top priority for many investors. No matter where you are in the planning process, you may have questions. We can help. Check out the questions we've already answered, or if you're a Fidelity customer, submit your own. We'll post replies to selected questions on a weekly basis.
Ken and Sarah answer your questions
For more than 60 years, through all kinds of market conditions, Fidelity has been helping people like you pursue their financial goals. Ken Hevert and Sarah Walsh, who lead our Ask Fidelity team, have spent decades helping investors understand retirement strategies. They can help put Fidelity’s expertise to work for you.
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When considering a large withdrawal from a 401(k), remember that the amount withdrawn will be added to your income for the calendar year and, depending on your current tax situation, could move you into a higher tax bracket, triggering a larger tax bill than you may have anticipated.
We always suggest that you consult with a tax advisor prior to initiating a withdrawal to make sure you’re aware of what the tax impact will be.
What will have the greatest impact on your Social Security benefit is the age at which you start to receive your payment. The earlier you start to receive your benefit, the lower the monthly payments will be. It’s important to take this into consideration when deciding when to start taking Social Security. For more information, read this Fidelity Viewpoints® article “Should you take Social Security at 62?”: https://www.fidelity.com/viewpoints.... For more help, please call your plan’s toll-free service center phone line and speak with a representative who can provide guidance based on your needs and objectives. If you’re considering a withdrawal from your plan, consult with a tax advisor to make sure you are aware of the tax implications.
Thanks and good luck.
Can I make an after-tax lump sum cash contribution to the 403(b) to make up the maximum annual contribution (including 15 year, and catch up amounts), or can I only contribute through salary withholding?
The first thing I’d like to ask you is whether you’re taking minimum required distributions (MRDs) from the 403(b) with your current employer? If you are still working for that employer you do not need to start taking MRDs from that account until April 1 of the calendar year after the year in which you retire. If you have a 403(b) with a previous employer, you would need to start taking MRDs from that account the year you turn 70½ even if you are still working for another employer.
If you are looking for a way to save more money for retirement with after-tax dollars, you may want to consider an IRA. An IRA may offer a wider variety of investment options and depending on your situation you may be able to take advantage of a Roth IRA with its tax-free withdrawals (for qualified withdrawals only).
Fidelity offers several options for after-tax retirement savings. Go here to learn more about IRAs: https://www.fidelity.com/retirement.... Besides an IRA, a deferred annuity can provide tax-deferred growth in retirement. You can learn more about annuities here: https://www.fidelity.com/annuities/....
With the number of options available to you, it might be helpful to speak with a Fidelity retirement representative by calling 800-345-1388. The representative can work with you to build a plan that makes sense for your specific needs and goals, including developing a retirement income plan to make sure your assets are invested properly and that you’re income needs will be met as long as needed.
1. The first one I mentioned above – Roll the money over to a new 401(k) plan. There would be no taxes or penalties, but as I said, not all plans will allow this so check with your new employer.
2. Keep the money in the plan – Most plans will allow you to maintain your 401(k) account as long as your balance is above the plan’s minimum threshold. No taxes or penalties would apply.
3. Roll it over to an IRA – A rollover to an IRA will keep your retirement money working for you in a tax-deferred account and can provide a wide variety of investment options. No taxes or penalties would apply.
4. Take a cash distribution – This option should be a last resort, since cashing out will incur income taxes on the distributed amount and will trigger an early withdrawal penalty if you’re under age 59½. In addition to the immediate financial impact, cashing out could significantly harm your ability to retire when you want to by reducing the amount of money you have growing in a retirement account.
Fidelity offers a variety of tools and resources to help you make a distribution decision. Go to https://www.fidelity.com/retirement... and watch the video about what to do with an old 401(k).
Thanks, and good luck.