What Happens to a 401K Plan After Retirement?

by Carrie Thomas ; Updated July 27, 2017

Withdrawals Before Age 59 1/2

Withdrawing funds before age 59 1/2, in general, will result in a 10 percent penalty. Coupled with the penalty, any funds withdrawn must also be taxed as income. This penalty is from the IRS, and is a reason why waiting until age 59 1/2 is advantageous.

Monthly Withdrawals After Age 59 1/2

People age 59 1/2 and older can withdraw funds without penalty. These funds are calculated based on your previous work income. Though you will not incur penalties after age 59 1/2, you still must pay income tax on the withdrawn funds.

Lump Sum Withdrawal After Age 59 1/2

Retired individuals also have the ability to withdraw lump sums. These sums do not incur any penalty after age 59 1/2, but are taxed as income.

About the Author

Carrie Thomas received a B.B.A. in marketing from St. Edward’s University. Her professional experience is focused in marketing coordination. She has been writing for approximately two years in various capacities. Her published work resides with Demand Studios.

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