Do You Pay Income Tax On 401(k) After Retirement?

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Hi there, Stan the Annuity Man, America’s annuity agent licensed in all 50 states. Top

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agent in the country and the tallest 6'6". I’m challenging that. 6'6", I see the

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annuity markets better, as they say. Can’t teach height. Today’s topic is,

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do you pay taxes on your 401(k) in retirement? Loaded question.

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I love loaded questions. Why? Because I fire. Does that offend anybody? That’s a handgun. Get it?

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I’m gonna do all of that. I’m going to riff factually about that after this.

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So, do you pay income taxes on your 401(k) in retirement? Boy,

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this is a fun one. I like this question because there’s a couple of answers.

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First of all, let’s talk about what a 401(k) is. I’m assuming since you clicked this,

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you already have one. For those who don’t, it’s a retirement plan offered by an

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employer to where typically they match your contribution on a monthly basis, and you’re

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growing that amount in market-type instruments like mutual funds and things like that so that

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in the future you can turn it into a lifetime income stream if you need lifetime income.

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Which leads back to the question, do you pay taxes on it? You don’t have to. How about

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that? Let me explain that. You have a 401(k), you walk into the boss’s office, you’re like, “I

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quit, you piece of crap. I’m outta here.” Say it like that. It’s great. Don’t burn bridges.

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But the point is you leave. You got this 401(k) asset. What do you do with it? Well,

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you can transfer it. Non-taxable event, which means, in English, doesn’t create any taxes.

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Non-taxable event transfer from the 401(k) to an IRA. 401(k) to IRA, no taxes.

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So you could say, “Yeah, I don’t really need anything. I’m just gonna move to the IRA. I’m out

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of there. You know, I work for that company. I’m out of there,” and you still are tax deferring

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until you reach the required minimum distribution age. Check that. Google that because it’s always

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changing. Okay? But at that point in time, when you hit required minimum distribution age,

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what that means in English is the IRS goes, “Uh, excuse me. Um, excuse me, excuse me. Uh,

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we need our money.” And you go, “Uh, you know, I don’t need to take money out.” And

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they’re like, “We don’t care. We’re the IRS and we need you to start taking money out,” called

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required minimum distributions. Keyword required. And you’re gonna pay taxes on that at that time.

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So eventually your 401(k) assets that could transfer to an IRA, eventually when you hit

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required minimum distribution age, the IRS is gonna tap you on the shoulder,

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and you will have to take money out. And at that point in time, you will have to pay taxes

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at ordinary income levels unless they change the rules. That’s the current rules. You have

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to pay taxes on that money coming out of that deferred account ’cause you’ve been deferring

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taxes, deferring taxes, deferring taxes, deferring taxes, which is great. But the IRS,

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eventually they’re gonna show up and go, “Hey, hey, hey, hey, hey, hey, hey, hey, hey!

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By the way, you have to start taking money out whether you want to or not.”

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Now, let’s just say you walk into the manager owner’s office at the company. “It’s been

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really nice working here. You’re a very nice person, but I’m gonna leave, and please never

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contact me again.” That’s probably a better way to do it. Okay. So, you walk out, you got your

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401(k). What do you do? You say, “Well, I’m really tired of the markets. I really don’t want growth.

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I don’t want risk. Me and the wife, me and the spouse need income. We need lifetime income.”

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You can then transfer the 401(k), non-taxable event. Non-taxable event,

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meaning it’s not gonna create any taxes, to a lifetime income stream annuity to either

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start now or at a future date. Once that income stream starts,

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you have to pay taxes on the money that’s coming out. Just like the RMD, same thing.

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So the real question that you have to answer is this: what do you want the money

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to contractually do? And when do you want those contractual guarantees to start with

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annuities? Remember, I’ve come up with an acronym called PILL. P stands for principal

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protection. I stands for income for life. L stands for legacy. The other L stands for

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long-term care. That’s why you buy annuities. There’s no G for growth. There’s no S for stock

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market. There’s no M for market. There’s no B for Bitcoin. Okay? PILL — contractual

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guarantees only. You own an annuity for what it will do, not what it might do.

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So that, going back to the question, which I just so definitely did. Do you pay taxes

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on your 401(k) in retirement? Do you pay income taxes? The answer is eventually

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yes. You can put it off as long as you can to your required minimum distribution age,

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or you might make the decision, “Me and the wife, me and the spouse need

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a lifetime income stream to pay us for as long as we are breathing,” in conjunction

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with the other annuity that you own. Social Security. Right? To create that income floor.

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So look at the 401(k). It’s an asset. It’s your investible asset. A large portion of it. Just what

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do you want it to do. If you want to stay in the market, then roll it into an IRA, tax-deferred,

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doesn’t create any taxes, and trade away, trader player. Go for it. Knock it out. Or you could say,

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“I’m gonna move part over here and part into a lifetime income stream.” That’s where we come

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in at The Annuity Man, because we’ve been doing this a long time,

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and everybody in my building is licensed in all 50 states, except they’re not on commission. Yes,

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annuities create commission, but they’re not on commission. They’re not incentivized by that.

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So, 401(k), big decision. If you’re watching this video, you probably turned the corner

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on retirement. You say, “Okay, what do I do with this? What am I gonna do

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with this?” Just remember, you don’t have to pay taxes on it. When you quit the company,

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you can just roll it to an IRA and keep it in the markets. Do whatever you want

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to with it. It’s your money. You can keep deferring it up until RMDs age,

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or you can do a portion into an annuity or all of it into an annuity if it’s not more than 50% of

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your investible assets. And we’ll talk about that. But just put it in the back of your head. Yes,

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all that tax deferral that you’ve been doing, eventually the IRS is coming

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to your door, as they say. Nod your head, Big C, behind the camera.

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And by the way, just to let you know, there’s another person here. I’m just calling him S

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because I won’t give it away. He’s from Venezuela, and we can’t get him to stop dancing. He’s just

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dancing. I mean, he’s doing this thing. I don’t know what it is, like a Venezuelan

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dance, but he’s pretty happy. So I’m happy, he’s happy, big C’s happy. I hope you’re happy.

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Do me a favor. Click that video up there. Click it. Why, Stan? I just watched your

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video. Because it goes in depth to what we do at The Annuity Man, why we are different,

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why you should consider us instead of your brother-in-law or sister-in-law selling annuities,

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why you should consider us. And I hope you go to my site at theannuityman.com. See you next time.