Month: December 2021

How Is Your 401(k) Taxed When You Retire?

When you withdraw funds from your 401(k)—or “take distributions,” in IRS lingo—you begin to enjoy the income from this retirement mainstay and face its tax consequences. For most people, and with most 401(k)s, distributions are taxed as ordinary income. However, the tax burden you’ll incur varies by the type of account you have: traditional or Roth 401(k), and by how and when you withdraw funds from it.