Ask an Advisor: I'm 73 With Poor 401(k) Returns. Should I Move to CDs?

Core Insights - The article discusses the implications of withdrawing funds from a 401(k) for retirement planning, emphasizing the importance of tax considerations and growth potential [3][4][5] Tax Implications - Withdrawing the entire 401(k) balance in one year could push the individual into higher tax brackets, resulting in a larger portion of the withdrawal being taxed at higher rates [4] - Spreading withdrawals over multiple years can minimize tax liabilities, allowing for more funds to be retained [4] Growth Potential - A 401(k) provides tax-deferred growth, which allows investments to grow faster compared to taxable accounts like CDs, where taxes on earnings are due annually [5] - Taking an immediate tax hit by withdrawing funds could jeopardize the longevity of retirement savings [5] Cash Reserve Strategy - Maintaining a cash reserve equivalent to one to three years of expenses is recommended for retirees, providing both safety and comfort [6] - This cash reserve can be held in various accounts, ensuring safety while earning some interest, and can be replenished through tax-efficient withdrawals from retirement accounts [7]