Was lucky enough to retire and travel and live off some savings. (still have a decent amount in cash savings) I started taking distributions late in the year so i have no other income for 2025 except the monthly 4k distribution. This started in August so for the end of the tax year i would show 20k income and need to pay those taxes. For ease lets assume i'm a single filer and use the standard deduction. Would it make sense to take a larger monthly distribution for this year to take advantage of the lower 12% tax rate up to roughly to 64k? ( 48k 12% tax rate plus the 15k single filer deduction) This is really a one time thing as the following years will have all 12 months of distributions. I get the idea that the more money you take out the less you earn on but in this one time case is the tax advantage on that money worth it?
I get those arent the exact tax rates – i rounded to basically make it easier to digest.
Question about taking out more from 401k in the first year if you only started taking distributions 8 months into the year?
byu/AngryTomJoad infinancialindependence
Posted by AngryTomJoad
3 Comments
I think this is when a one-time meeting with a CFP or tax professional is probably money well spent.
My current plan is to use a combination of savings, taxable brokerage, traditional, and Roth money to try to always top out the 12% space and keep my effective tax rate very low. But I need to sit down with a professional to model that.
Yeap, since you’ll only show partial-year income, taking extra this year lets you “fill up” the 12% bracket instead of wasting it. You’ll lose a bit of tax-deferred growth, but the one-time tax savings usually outweigh that.
I think it depends on what the next few years look like for you. If you constantly spend $44k per year but keep taking out $64k, you would probably be better off doing Roth conversions. If you think you need to increase cash savings or plan some higher spending years in the next few years then withdraw and put in HYSA.