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401(k) Fact |
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According to the U.S. Department of Labor, only 5% of people 65 and older have enough money to meet their needs independently.
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One way to receive income from a 401(k) plan or individual retirement account (IRA) is to arrange for a systematic withdrawal, sometimes called a periodic withdrawal. You do have to be certain, though, that this is an option your plan or IRA offers.
You can generally choose to receive:
- A regular, fixed dollar amount on a specific schedule
- A specific percentage of your account value on a specific schedule
- The total value of your account in equal distributions over a set period of time
You select a monthly, quarterly, semi-annual, or annual schedule. But systematic withdrawal arrangements are usually flexible, which means you can adjust the withdrawal arrangement by notifying the plan administrator or your IRA custodian. You can generally stop the payments, readjust the amount you receive, or choose another withdrawal method.
Systematic withdrawals can make it easier to budget, since your money arrives on schedule. And you don’t have to make the decisions about what to liquidate or when to sell. A professional handles those details. That includes ensuring that your withdrawal meets the minimum required distribution after you turn 70½.
The one potential drawback of systematic withdrawals is that you could use up your assets during your lifetime. If your money is paid out at a faster rate than your account is growing, you’ll be receiving principal as well as interest and dividends, reducing the amount available to accumulate additional earnings. Eventually your account value could be zero.
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