Retiring, wife working a few more years. Max her 401k and withdraw more from IRA or the reverse?

Foolish not to take that money.

How is your IRA flat this year? Should be up at least a few percentage points on the strength of the bull market–even if you’ve shifted a lot into bonds.

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We’re up about 22k from 1/1/18 on a little over 1.1m
pretty flat.

.33% ytd, but 8% 1 year.
it was 18% the end of last year.

and you’re right, I wouldn’t not take that free money.

This is basically correct, assuming both the IRA and 401k are of the same kind, i.e. Both Traditional / pretax, or both Roth. Obviously you don’t want to give up the match.

Do you have any state tax considerations? Some states for example treat the first $10-20k of retirement withdrawals favorably, in which case it would be better for her to do the 401k while you take out of your IRA up to the annual state tax deduction limit.

There are some other small considerations like how 401ks aren’t subject to RMDs while you work and can be withdrawn from a bit sooner than IRAs without penalty, 401ks are usually harder to convert to Roth than an IRA if that’s strategic for your income in a given year, etc, but none of those seem super important one way or the other.

Does anyone know if your employment taxes, i.e. SS, Medicare, etc, are reduced by pretax 401k elective deferrals? That could be a reason to keep contributing but I’m not up on the payroll tax side of things.


Good point on the Roth conversion for IRA vs 401k, but I would assume OP has enough in his IRA already that he could convert where not needing to convert his wife’s 401k if that were of interest. RMD considerations are also a big part of retirement planning but again, sound like a wash if OP withdraws his IRA at the same rate as wife’s 401k contributions (which may later also be converted to an IRA when she leaves her job).

I live in a no income tax state, so was not aware of favorable IRA withdrawals, but this could make a big difference in state income taxes where it is the case.

401k contributions are subject to payroll taxes for contribution but not for match: Retirement Plan FAQs Regarding Contributions - Are Retirement Plan Contributions Subject to Withholding for FICA, Medicare or Federal Income Tax? | Internal Revenue Service

Despite this, it wouldn’t affect your 401k maximum contribution limits.

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Thank you all for your comments.
No state income tax… Florida.
IRA is a collection of rolled over 401ks and cashed out lump sum pensions. 401ks are all traditional pretax.
It sounds like we should reduce her contribution to the minimum for full match? Supplement that net pay with enough from the IRA to get us to about 6.8k a month?
I can also pay down the car loan from cash, and look into refinancing (suggestions would be welcome)
Thank you.

I’m thinking maybe you shouldn’t withdraw more than you actually need? You’ll end up paying federal income tax on your IRA withdrawals. You have minimal debt and no mortgage, why do you need 6.8k/mo?

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Good point. Our “nut” is approximately 2.2k per month to live in the house, gas, insurance etc. We charge basically everything ( costco executive member visa) maybe I could just pay the credit card bill out of the IRA?
Still, the question remains… Reduce the 401k contributions to take out less from the IRA, or leave it alone and take more from the IRA?

If you have 100k cash, personally I’d use that to pay your bills, max your wife’s 401k and not take anything out of your IRA until required. If you end up in a lower tax bracket or lower than expected future RMD brackets, do an IRA to Roth conversion/backdoor. That will keep your retirement accounts fully invested and give you a Roth rainy day fund if you do want/need more than your RMD in the future, tax free.

Your money should do better on average invested even 70% bonds/30% stocks than the going savings deposit rates.


The Costco Visa doesn’t differentiate between membership levels. It’s also not the best card for use outside of some categories (gas, travel, restaurants OK). Depending on your annual credit card spend, it may not even be the best card to use at Costco. See this thread.

Even if you could do that directly (and you probably can’t), it’ll still be a withdrawal subject to income tax. I like Corndogg’s suggestion – use your already-taxed money for living expenses until your wife retires.

So in a year and a half your SSI will cover most of your living expenses. I don’t think your wife needs to work anymore. You both could have probably retired 5 years ago.

I was thinking the same thing.

You may find some of the articles at helpful. He explains the various accounts and how to optimize their use.

I like the way you guys think :wink:
By “nut”, I mean essentials such as utilities, taxes, insurance., gas (avg) no food, entertainment etc. ~2.2k

Total credit card spent this year was 17k (paid off every month) with probably another 6k in cash and other “leaks” to bring our spend to ~6k a month. No vacations yet, Some furniture and larger items adding up to ~4k are included in the above.

With the credit cards you mentioned… Non costco charges were 10k. so at 1% using the costco card, I get $100 rewards. The best / easiest options to “double” that was the fidelity 2% and Citi 2%. Ultimately not worth the time to track another card for $200 in rewards a year, IMHO. Ive gone through chasing the revolving 5% rewards… it worked out a few times. But it seems like sometimes you’re chasing pennies. I know raindrops make rivers… but seriously?

This exercise is making be feel much better about my decision to retire.

I like the idea of having the cash liquid and dont want to burn through it. We should consolidate most of it into the 1.49% savings account. That’s apparent.

Also, Corndog, You mentioned 3% auto loans? Our credit union offers 3.49%. I wonder if I can get lexus to match? ~$500 savings over the last 2.5 years. Or I could pay it off for a ~$1100 savings.

Keeping the wife working? She gets great medical insurance. in 4 years she could potentially retire with those benefits. And I’ll be 1 year away from Medicare. Paying our own insurance and losing her salary would be a big hole in the bucket.

It again seems that reducing the 401k contribute from like 20k a year, down to the maximum match. That would give us $850ish in “extra” monthly income… so that much less to withdraw from the IRA. Sound good?

I honestly haven’t been pricing out auto loans recently but the 3% I suggested earlier was my own data point that Columbia Credit Union (NW regional bank) offered me to refi my used auto when I opened a checking account for a $200 bonus. I’m currently 1.5 yrs into my 1.95% loan. It’s always funny to shock bankers with low rates.

Penfed is currently offering 2.49% refi for 2017/2018 vehicles and 3.49% for older used vehicles.

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Lightstream is 3.09% and up.

Actually, one of my credit unions is offering 2.75%. I shopped around a bit.
I looked at savings interest rates too. I have 3 more months to decide.
That same CU is paying like 0.5% in checking but it goes to 1.375 in the savings… guess what got transferred to savings today?
raindrops make rivers, right?


You spend $72k/year, but only $17k of that was on credit cards? Everything but mortgage can be charged. If you put more of your spend on a card, maybe a better card would be worth it. Maybe.

No, 17k is year to date. So let’s just say 35k for this year, then 25k for living expences. So 60k that I can track easily. No vacation this year yet. One other card I use is the chase Ink, for business. Gives 5% back on cable, cellphone and the like, and other things like I think staples and such. I auto debit out cellphone, cable and Netflix to it and auto pay it each month. Nearly $15 month / $330 back a year.

I’ll toss out another option – mortgage your house.

If you want some income and want to continue to put into the DW 401k, then I think a mortgage might be an option to consider – probably a HELOC or HE, rather than a full mortgage, but whatever… I don’t have any issues with having a mortgage until I die… some do.

The funds from the mortgage could be put into a money market or CDs and drawn upon (like income) as you need it. DW will be in the 12% tax bracket with her income. If you withdrew from your IRA / 401k at the rate you state, then some of your combined income would be in the 22% bracket (assuming filing jointly).

So the savings on taxes might outweigh the interest on the mortgage. I’d have to dive deeper in the math and you’d have to dive deeper into your tax situation to be sure. Others here might have a gut feel for this.

Whenever this plan doesn’t work anymore, you can just pay it off and you are done.

I appreciate the input, but Im not sure how thats workable. Id have a mortgage, so Id have to pay it back on that lump sum. My credit unions HELOC rate is 4.5%. Putting the money in the bank might get me 2%. Putting it in the market or bonds? Wouldn’t I be better to borrow on margin (Which Id never do)?

You had a good point on the tax bracket. Ill have to explore that.

No. I was just trying to get the math done on decreasing my wife’s maximum contribution and living off that and a partial draw from our IRA, or just draw more from the IRA and leave the 401k contribution intact. I believe I’ve made the decision that it will be better to take less from the IRA and decrease the contribution to get the maximum company match. Its always good to have a few eyes on a problem.


Off the top of my head I think no. I recall contributing to my solo 401k from my S Corp last year and we did payroll for that purpose. That payroll had FICA taken out.

I consider it one of the weaknesses of the solo 401k because one could otherwise take the money as a distribution, avoid fica, and enjoy 20% tax break thanks to new tax law