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Question: I read your article about making a withdrawal from your 401(k) account by age 70½. I had checked on my prospect of beginning to take money out. I don't have that much in my account so I want to protect it as much as I can from the IRS.

I believe that if I request a $5,000 withdrawal (I'm 65 years old) then they will only send me $4000 and withhold 20% for taxes. I might get some of this $1,000 back when I file my tax return, but if I can withdraw the money in my account without paying any taxes that would be a bonus.

I regularly tithe 10% of my income to my church, but now with the new tax laws I will not be able to meet the $24,000 standard deduction to be able to itemize like I could in the past, so my church giving won't really help me at tax time. Can I request that my 401(k) send my church money from my account every year to avoid any taxes that I would owe because of my taking money from my 401(k) account?

Also, I worked for a state government and they contributed a $50 match each month to my account. I had money in both a 457 and a 401(k) and none of it was taxed as income. I only have about $35,000 total in both accounts but would like to pay my church tithe out of those accounts until it runs out. That should take about five years if I have them send my church $7,000 per year. This sounds like a smart thing to do, but I wanted to clarify this to see if that will work.

Answer: So, let's break down your question into several smaller pieces.

First, you mention that if you take a distribution from your 401(k), your plan will automatically withhold 20% for federal income taxes. That's true, says Jeffrey Levine, the CEO and director of financial planning at BluePrint Wealth Alliance.

According to Levine, 401(k)s and similar plans must generally withhold a minimum of 20% of an eligible rollover distribution for federal taxes. "This rule, however, does not apply to IRAs," says Levine. "Therefore, if one of your goals is to minimize the amount of federal income tax that's withheld from your distributions, you could first roll over your 401(k) balance to an IRA, and then take a distribution from that IRA. IRAs distributions are not subject to the same 20% mandatory withholding requirement."

Instead, says Levine, you can generally opt to have none of your IRA distribution withheld for federal income taxes, or at least 10% withheld for that purpose.

As for having your 401(k) send money directly to your church to help meet your tithing goals, you've got a few options. "Your 401(k) may allow you to send a check to a third party, but it won't help you at all from a tax perspective," says Levine. "The distribution will still be treated as being paid to you directly, and then you'll have to claim a deduction for a charitable contribution on your return, which sounds like it won't do anything for you with the new, higher standard deduction. In other words, it won't be any different than if you received the check from your 401(k) and then wrote a check out to your church."

If tithing is a long-term goal for you, and it sounds like it is, Levine says you may want to consider an alternative approach. "Instead of using your retirement funds to meet your tithing goals now, wait another 5 ½ years until you are 70½ to do so" he says. "Once you reach 70½, you can utilize something called a qualified charitable distribution, or QCD for short."

Read Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs) for additional information and FAQs regarding IRA distributions and withdrawals.

In essence, a QCD allows you to have up to $100,000 annually sent from your IRA directly to a qualified charity. "You won't get a deduction for that contribution, but it won't be added to your adjusted gross income or AGI in the first place," says Levine. This approach helps to lower your overall tax bill and is especially beneficial for taxpayers, like you, who file using the standard deduction and who get no tax benefit from charitable contributions anyway. In the interim, you can use other assets to meet your tithing goals."

If you have enough assets to do so, Levine also notes that you may want to consider the use of a donor-advised fund (DAF). "Using a donor-advised fund, you could, for instance, transfer five years' worth of funds for tithing purposes," he says. "You would generally get an immediate deduction for the full amount of that contribution -- which would probably allow you to itemize your deduction in the year of contribution -- but the money could actually be paid out from the donor-advised fund to your church over the five-year period. By then, you'll be 70½ and could switch over to the QCD for tithing purposes."

Got questions about retirement, investing or money general? Email Bob at or

Question: I read your article about making a withdrawal from your 401(k) account by age 70½. I had checked on my prospect of beginning to take money out. I don't have that much in my account so I want to protect it as much as I can from the IRS.

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