Best use of 401K while in tax-exempt status on disability annuity

Asked July 24, 2016, 1:03 AM EDT

I am on disabilty retirement from Federal service. Since I've reached the min.retirement age (56) I do not have to pay Federal taxes on this annuity. However, once my disability annuity converts to a regular retirement annuity, that annuity will be taxable ( about age 62).

I'm not certain how best to use my monies. I have a small 401K, some cash and plan to invest in mutual funds with the 401K and the cash.I also have significant out of pocket medical expenses.
Shouldn't I use my 401-K monies now, for medical and dental expenses, when I can get those dollars tax free(now and without early withdrawal penalty) and keep my cash monies for later? I appreciate the advice and the rationale that supports the advice.


2 Responses

It is usually not a good idea to use your 401k monies. However, your questions require the expertise of an accountant and a retirement specialist. I would talk to one of the financial experts where you have your 401k and also to your accountant.

Thanks if I had an accountant and retirement specialist I would.