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How much are you taxed for a 401K withdrawal under age 59?


How much are you taxed for a 401K withdrawal under age 59?

A similar questions was asked a couple of days ago. If you are allowed to withdrawl money prior to retirement age (and you may not be able to, check the plan details), you will record all money taken out in line 16d of the Earnings section of your 1040. The tax paid depends on your tax rate, so there is no single answer for the question.

You will very likely be subject to the 10% penalty for early withdrawal. This penalty will be assessed by the institution holding the 401(k). You will receive a 1099-R from the same institution.

A bunch - figure on about 25% of the withdrawal (as it's a function of both Federal and State taxes).

Your marginal rate plus 10% plus any state tax. So if you are in a 25% bracket your federal tax and penalty would be 35%. If you take enough to get to the next bracket it would be even more. So if you have a state income tax it would be in addition to the 35%. Also they normally only withhold 20% so you would need to come up with the rest of the tax.
Some plans allow withdrawals for hardships and some allow loans.
Loans will cost you some interest and if you don't repay when leaving a job they convert to withdrawals with penalty.
Do almost anything to avoid taking a withdrawal.
There are a couple of exceptions to the 59 1/2 penalty like leaving your job over 55 or taking substantially equal payments for at least 5 years or until you are 59.5 whichever is longer.

10% penalty for early withdrawal plus the gross amount withdrawn is taxed as ordinary income. Figure to lose around 40% of the gross withdrawal amount.
www.401k.org

10% plus the taxes

In general, you're taxed your marginal tax rate, plus any state taxes, plus a 10% penalty tax. If you want to know more about getting money out of your 401(k), check out http://www.plannerconnect.com/retirement...

One option you may have is taking a loan against your 401(k) rather than taking distributions. There's pros and cons to this too though, so talking to a financial planner may help.

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