What penalties would I incur if I withdrawal from my 401k after tax monies?
Kelly D asked:
Here is my question. Say I want to withdrawal a certain amount of money from my 401k after tax money, would I have a penalty in doing so? I am not knowledgeable about this and looking for info.
This entry was posted
on Thursday, April 16th, 2009 at 12:00 am and is filed under United States.
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
Here is my question. Say I want to withdrawal a certain amount of money from my 401k after tax money, would I have a penalty in doing so? I am not knowledgeable about this and looking for info.
April 19th, 2009 at 1:06 am
you would pay a 10% penatly on it.
If you put it into a roth 401 k, you would have to prorate the distribution between earnings and contributions. That is if you put in 10k and now have 12k, if you withdraw 2k, one sixth of the distribution will be included as tax able income. 333 will get added to your income and taxed at your marginal rate, plus the entire 2k will be subject to a 10% penalty.
April 20th, 2009 at 8:58 pm
You would pay taxes on it at your regular tax bracket rate, and if you are under 59 1/2 and don’t meet certain exceptions for using the money (first time home buyer for one, medical expenses for another, etc) there is an additional 10% penalty that you would have to pay on top of the tax.
April 23rd, 2009 at 1:46 am
your best bet is to take a loan off it.you wont pay taxes,but you will pay interest on it.the interest you pay goes back into your 401,remember its your money.
April 26th, 2009 at 2:04 am
If you withdraw from a 401k and do not roll an equal amount into another 401k or an IRA, you will pay a 10% penalty on the total withdrawn. If it is a traditional 401k, you would also pay taxes at your marginal rate. If you have a Roth 401k, which would be after tax money as you mentioned above, you would not pay tax, but still be liable for the 10% penalty.
Ideally, you should roll into an IRA if you can. You can open an IRA at any mutual fund, bank, or brokerage. I recommend etrade or TD Waterhouse.
April 26th, 2009 at 6:28 pm
First you have to find out if you are allowed to withdraw money from your 401k. If you are still employed it is probably not possible to take a distribution.
Your penalty will be 10% of your entire distribution. In addition, you will pay income tax on any part of the distribution that has not already been taxed.