My wife (50) needs to withdraw all the money from her 401k to pay $60,000 debt accumulated from being first unemployed and then under employed for the last 6 years. The total amount of 401k is about 70,000. They told her that there would be a 20% penalty on the withdraw lowering the amount to about $50,000. They said that amount would have an additional tax penalty of 10-20% at the end of year. Is this really true that the tax penalty could be nearly 40%? Any moves she can make to reduce either tax penalty?
