How to Set Up Periodic Payments from Your 401(k) in Retirement

As you approach retirement, you’ll need a plan for turning your savings into income. One of the most flexible options is setting up periodic payments from your 401(k)—a way to receive regular withdrawals on a schedule you choose.

Periodic payments allow you to withdraw money from your 401(k) in recurring installments, such as monthly, quarterly, or annually. These payments provide a steady income stream without taking all your money out at once.

Unlike lump-sum distributions, periodic payments let you:

• Stay invested and continue growing your balance

• Control how much you take and when

• Align withdrawals with your retirement budget

You can begin withdrawals at any time after you leave your job, but most retirees start around age 59½, when IRS penalties on early withdrawals no longer apply.

Required Minimum Distributions (RMDs) begin at age 73 (if you turn 73 in 2025 or later). You must withdraw at least a minimum amount annually starting that year, even if you don’t need the income.

Here’s how to get started:

1. Log in to your 401(k) account

Select the “Withdrawals” menu option and complete the online submission form. NestEggs will reach out to you with an election form where you can choose your preferences.

2. Select your payment frequency

Choose how often you’d like to receive payments:

• Monthly (most common)

• Quarterly

• Semi-annually or annually

3. Decide how much to withdraw

You can choose:

• A fixed dollar amount (e.g., $1,000/month)

• A percentage of your balance

• RMD-only payments (for compliance with IRS minimums)

4. Provide tax withholding preferences

You can elect to have federal and/or state taxes withheld from each payment. If you don’t choose a specific election, we will automatically withhold 20% for federal taxes on eligible distributions.

5. Set your bank details

Link a checking or savings account for direct deposit.

6. Confirm and monitor

Once scheduled, you’ll receive a confirmation. Monitor your account periodically to ensure your withdrawal strategy remains sustainable.

• Sustainability: Make sure your withdrawal rate aligns with your expected lifespan and market conditions. A common rule of thumb is the 4% rule, but individual needs vary.

• Taxes: Distributions from traditional (pre-tax) 401(k) funds are taxable as ordinary income.

• Roth accounts: Qualified Roth 401(k) withdrawals are tax-free if you’re at least 59½ and have held the account for 5+ years.

• Fees: Some plans charge transaction fees for each installment or limit the number of scheduled payments per year.

Yes. Periodic payments are flexible—you can:

• Pause or stop withdrawals

• Increase or decrease the amount

• Switch to a lump sum or RMD-only approach

• Roll over your balance to an IRA for even more flexibility

Check with NestEggs for specific rules and processing times.

A financial advisor can help you:

• Build a sustainable withdrawal strategy

• Plan for taxes

• Coordinate withdrawals with other income (like Social Security or pensions)

NestEggs also offers free retirement income tools or consultations. Contact us to get started.

Periodic payments from your 401(k) give you control and flexibility in retirement. Setting them up is straightforward, and you can adjust the schedule or amount over time to match your evolving needs.