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Published: Jan 26, 2017 3 min read
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Q: We have a 401(k) retirement account and would like to begin withdrawing money so that our RMDs are smaller at age 70 ½. My wife is 61 and I am only 58 years old. What are the rules for withdrawals when one spouse is not yet 59 ½ years old?

A: As you note, tax law generally requires that retirement savers begin withdrawing money from their traditional 401(k) accounts and IRAs at age 70 ½. These required minimum distributions (RMDs), which are taxable, are Uncle Sam’s way of finally getting his hands on money that has grown tax-deferred throughout your working life. Meanwhile, funds withdrawn before age 59 ½ are generally subject to a 10% penalty, unless you qualify for one of a limited number of exceptions.

Taking some withdrawals before you get to 70 ½ can spread the tax burden over a longer period and help you avoid having the RMDs push you into a higher tax bracket.

A key question here: Are you the owner of the 401(k) you mention? If so, you’re probably out of luck, says Richard Lavina, co-founder and CEO of Taxfyle, an app that bills itself as Uber for your taxes.

Ownership of retirement accounts is individual and the owner must generally reach age 59 ½ in order to withdraw the funds without the 10% penalty, Lavina says. Naming someone a beneficiary on the account doesn’t make him or her co-owner.

Another important question: Are you still working for the company? One instance in which you can pull out money before 59 ½ penalty-free is if you leave your job in or after the year you turn 55.

Alternatively, if the 401(k) belongs to your wife, you're good to go.

To get a sense of the amount you’d need to withdraw if you waited until age 70 ½, check out this worksheet. One factor to consider in weighing earlier withdrawals is your tax bracket at various points in time. If you are currently working, do you anticipate dropping down a bracket when you stop full-time work?

Many retirees do drop down a tax bracket in early retirement. If you’re one of them, you’ll pay a lower rate on your withdrawals then than you would now, when you’re still working. One caveat: President Donald Trump has proposed collapsing today’s seven tax brackets into three, and if he gets his plan through Congress your math could change.