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How to Avoid Tax on Retirement Withdrawals

Getting money from retirement accounts can come with strings attached: Income tax, early withdrawal penalties, and tax withholding may leave you with less than you hoped. So, how do you avoid taxes on 401(k) withdrawals and other accounts? In some cases, you just have to pay. But sometimes, there are several opportunities to get 401(k) money without paying taxes—or at least manage the taxes so you have the resources you need. 🌞 Subscribe to this channel (it's free):    / @justinonretirement   Get free retirement planning resources: https://approachfp.com/2-downloads/ 🔑 9 Keys to Retirement Planning 🐢 6 Safest Investments With a low enough income, you may pay at surprisingly low rates. But that’s not always feasible, especially if you withdraw a substantial amount. You can also try taking loans or Roth distributions, when available, if you need to avoid raising your taxable income. But there are always pros and cons—you might not want to wipe out your Roth assets, and loans can be problematic in several different ways. And with Roth, you start with after-tax money, so it's not like you're completely dodging taxation. There’s also the question of mandatory tax withholding. What if you need all of that money, and you expect to pay taxes at a lower rate? You may be able to avoid tax withholding in some cases. Of course, whether or not you pay tax today may ignore the big picture. Getting money out of a pre-tax retirement account without paying taxes could cost more later. For example, it’s possible that you’ll owe underpayment penalties. What’s more, you’ve got the rest of your life to think of. Whenever possible, think of how these withdrawals might fit with a well-designed retirement income strategy. Is it better to pull from traditional or Roth, or is it just best to leave retirement funds untouched. You won’t always have the luxury of picking and choosing (especially when life happens), but it’s always best to consider your long-term plan. More on this topic: Exceptions to 10% early withdrawal penalty: https://www.irs.gov/retirement-plans/... How much tax do you pay on distributions?    • How Much Tax Do You Pay on 401(k) Withdraw...   How 401(k) loans work:    • How 401(k) Loans Work: What to Expect   Learn about working with me at https://approachfp.com/ ✔️ Flat-fee and hourly advice options ✔️ One-time projects available ✔️ Investment advice (optional) Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states. CHAPTERS 0:00 How to Get 401k Money Without Paying Tax 0:31 Low Income Tax Brackets 1:57 Roth Distributions and Earnings 3:28 401(k) Loans and Taxation 4:23 Mandatory Tax Withholding 6:17 Avoiding Early Withdrawal Penalties 8:45 Qualified Charitable Distributions (QCDs) Remember that it’s critical to review your situation with your own tax, legal, and financial experts before making any decisions, taking withdrawals, or filing a return. Your reality might be significantly different from what this video describes, so you need to triple-check everything. IMPORTANT: It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.