About $5,000 just fell into my lap. I already have savings for a rainy day and beyond. At 59 1/2, does it make good financial and tax sense for me to do a 401(k) catch-up? I would just use the $5,000 windfall for living expenses while the same amount is being funneled from my paychecks into my 401(k). Am I on to something … or is this an ill-conceived notion? — J.H., Georgetown
This is something you’ll have to work out with your tax accountant, because the answer depends on your current marginal tax rate while working and your future marginal tax rate when retired. When IRA accounts and 401(k) accounts were created, everyone assumed that savers would be putting the money aside and deferring taxes at a high rate, but would take money out later at a lower tax rate. That, however, was before the taxation of Social Security benefits pushed retirees into higher tax brackets.
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