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[Music] hi everyone Joseph fairness is business intent this video is about how to withdraw from 401k Roth 401k IRA Roth IRA and Social Security for your retirement plan understanding how to use these retirement instruments for your retirement plan can be as complicated as you want it to be or it can be simple the information available can be overwhelming so my approach for this video is to draw a straight line through the confusion and simplify this topic as much as possible remember one thing you can do all the research and talk to as many financial advisors as you can I assure you by the end your final decision will not be perfect and this should be okay because there are so many unpredictable events in life and especially in retirement here's my straight line opinion I suggest you get informed don't overwhelm yourself make your decision and adjust as you move forward my name is Joseph L Czechia and if you want to know more about me please visit my website business and 10.com I will be publishing a series of videos that will deal specifically with the issues that baby boomers will be facing for retirement and I hope with your help to provide some useful solutions for all of us please subscribe this channel and hit the bell button this way you'll get notified for when I'll publish the next video I have a blog on this video if you want to read more about this topic and the link is in a description section below I also have a retirement budget form that I believe can help you in a big way to figure out your retirement finances so please pick it up it is yours for free I left you a link in the description section as well [Music] the topics I want to cover in this video are one Social Security with drought conditions two 401k on Roth 401k withdrawal conditions three IRA and Roth IRA withdrawal conditions for consolidation of accounts and five distribution plan number one Social Security withdrawal conditions Social Security is the most commonly used income plan for retirement you can start receiving your benefit as early as the age of 62 the age boundaries for applying for Social Security benefits start at age 62 and end at age 70 and your full retirement age varies depending on the year you were born here's a table indicating a full Social Security retirement age take a look for a minute and you can rewind to see it again there are many different ways to decide on the most effective age to start receiving your Social Security benefits the simplest way to follow in my opinion is to make a decision based on the following two factors number one if you are in need for money the decision is simple start receiving your Social Security benefits at the earliest possible age number two if you're not in need for money then start receiving your Social Security benefits at your full retirement age just look at the table and go for it there is one key calculation perhaps most of us would like to be familiar with and do which is the break-even age this is based on the idea that if you start your Social Security benefits at an early age then you would have more Social Security monthly checks in comparison to starting the benefit at a later age and to calculate the break-even age the math is simple but the unpredictable part would be your longevity how long you are going to live so here's an example let's consider two people of the same age and they are eligible to the same Social Security benefits one of them chooses to retire early at the age of 62 and the other one chooses to retire at the full retirement age of 65 the difference is three years the first one would receive three years worth of Social Security checks while the second one would receive none until they hit the age of 65 let's say that benefit at the age of 65 is $1,000 and the benefit at the age of 62 is reduced by 20% to $800 if you do the math the break-even point would be the age of 77 the second retiree would have to receive their Social Security checks from the age of 65 until the age of 77 to catch up with the retiree the started receiving their checks at the age of 62 after the age of 77 the second retiree will have an extra two hundred dollars per month more than the first retiree there are many different alternatives to maximize your full benefit that you can receive from Social Security the calculation can be somewhat complicated and of course you have to make some guesses on how long you will live and so on and by all means if you are up to the task please go for it and maximize the total amount you are eligible to receive you certainly work hard for it my simple recommendation would be if you need the money start receiving your Social Security as soon as you are eligible if not wait until your full retirement age as simple as that number two 401k and Roth 401k withdrawal conditions to qualify for distributions from your 401k you have to be at least fifty nine and a half years old otherwise you will be penalized ten percent on the amount withdrawn all of 401k distributions are subject to taxes at your current income tax rate regardless of when you was draw the money Roth 401k distribution is non taxable because the money you contributed was an after-tax money so you will not have to pay taxes on your Roth 401k distributions and there would be no ten percent penalty applied as long as you are fifty nine and a half years old and have held the Roth 401k account for a minimum of five years if you would draw a non-qualified Roth 401k distribution you will be taxed at your current income tax rate and a penalty of ten percent will be applied to the earnings portion not the contributions the earnings is the money you made on your contributions like the interest dividend and capital gain 401k and Rath 401k required minimum distributions you are required to start taking a minimum distribution by April 1st after you turn 70 and a half years old and if you have not taken any distribution until then you will be required to start taking distribution based on regular intervals which is calculated on the balance of your 401k and Roth 401k accounts and your life expectancy number three IRA and Roth IRA withdraw conditions IRA distributions have similar rules to 401k distributions to qualify for taking distributions from your IRA you have to be at least fifty nine and a half years old otherwise you'll be penalized ten percent on the amount withdrawn and all IRA distributions are subject to taxes at your current income tax rate the IRS can waive these penalties when a distribution is used for qualified medical expenses health insurance tuition for higher education or to purchase your first home Roth IRA distribution is non-taxable because the money it contributed was an after-tax money so you will not have to pay taxes on your Roth IRA distributions and there would be no 10% penalty applied as long as you are fifty nine and a half years old and have held the Roth IRA account for a minimum of five years if you will draw a non-qualified Roth IRA distribution you will be taxed at your current income tax rate and a penalty of ten percent will be applied to the earnings portion not the contributions the earning is the money made on your contributions like the interest dividend and capital gain the IRS can waive these penalties when the distribution is used for qualified medical expense higher education or to purchase your first home you are required to start taking IRA minimum distribution by April 1st after you turn 70 and a half years old and if you have not taken any distributions until then you will be required to start taking distributions based on regular intervals this is calculated on the balance of your IRA account and your life expectancy if you fail to take a distribution after the age of 70 and a half years old you will be taxed at 50% on the missed distribution so make sure that these distributions are always taken on time and if you don't need the money take it anyways and reinvest it into a Roth IRA you will not have these limitations the Roth IRA Roth IRAs don't have a required minimum distribution number for consolidation of accounts depending on how many jobs you have had throughout your career and a number of 401k accounts you may have collected along the way you may want to think about consolidating all of your 401ks under a single account as long as it does not negatively impact your finances it is easier to manage a single account of course you will need to consult with your plan administrators on the options that you have for the transfers once you decide on the consolidation transfer all of you 401ks - your current company 401k ask the plan administrators to transfer your holdings directly to your current company 401k account and don't take a personal check you may also want to consolidate your 401k accounts into your IRA account again as long as the consolidation does not negatively impact your finances if you decide to consolidate your 401k into your IRA account ask your 401k plan administrator to directly transfer your money into your IRA account you don't want the 401k administrator to cut you a personal check because you would have to pay income tax and penalties on the full amount ask them for a direct transfer it is possible to accept a personal check as long as you deposit the money into your IRA account within 60 days but to be on a safe side have the plan administrator transfer the money directly to your IRA account here are some do's and don'ts about consolidation you can't transfer Roth 401k into a traditional IRA because the Roth 401k is an after-tax retirement account and an IRA is that before tax individual retirement account you don't want to transfer your traditional 401k to your Roth IRA because if you do you'll have to pay taxes on your total 401 Holdings at your current income tax rate you can transfer Roth 401k to a Roth IRA no problem number five distribution plan add up all the money available for your retirement from your 401k Roth 401k IRA and Roth IRA and let's call this total retirement savings and now calculate your anticipated life decide on your retirement age the age you want to retire and subtract it from the average life expectancy of eighty-five years 85 years is the current average life expectancy in other words anticipated life equals 85 - retirement age divide your retirement savings by your anticipated life this number will give you the retirement savings distribution that will be available on an annual basis for the duration of your anticipated life then divide the result by 12 to give you the retirement savings monthly distribution now add to your retirement savings monthly distribution to your eligible Social Security monthly payment the total will give you your available money for retirement on a monthly basis deduct income tax from the available money for retirement this will give you the net money available on a monthly basis after-tax for your retirement income I hope this number your retirement income is equal or greater than your retirement monthly expenses if it is then great you can retire all you have to do now is to decide which retirement savings to cash out first if your retirement income is less than your retirement multi expenses then the following can be your options number one reduce your retirement monthly expenses number two use other savings if you have them number three sell some assets like your home if all of these options don't work then laughs you can't retire now and you need to work a bit longer in conclusion retirement decisions are never straightforward there are many options that you would have to consider to come up with the most optimal decision for you keeping things simple however is always a good idea your primary income while in retirement could be your Social Security and whatever you have saved in your 401k Roth 401k IRA and Roth IRA so I recommend that you do your research and become knowledgeable on how these retirement plans work your happiness during retirement will depend on it I hope this video made sense to you if it did please share it and hit the thumbs up tell me what topics you would like me to cover next by leaving me a comment in the comment section below and I will try my best to do it please subscribe to this channel and hit the bell button this way you will know when I will release the next video please don't forget to download the retirement budget form I believe it can help you in a big way to figure out your retirement finances I left you the link in the description section below thank you for watching and see you next time [Music]