Requesting a $90k payment from 401k, would I get the whole $90k now and pay penalty and tax in April or do they take the penalties and taxes out first and send remainder?

Forum|Forum|7 years ago
June 6, 2019
6 replies
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SweetieJean

Alumni - Champ

Are you going to roll it over to an IRA?

fanfare

Level 15

custodian will not take out your penalty unless you ask for more to be withheld, for example 30% instead of 20%.

dmertz

Level 15

If the distribution is eligible for rollover (it is not an RMD, distribution of an excess contribution, a deemed distribution due to 401(k) loan default or a hardship distribution), the 401(k) plan is required to withhold a minimum of 20%, but as fanfare said, 20% will almost certainly not be sufficient to cover your additional income tax and early-distribution penalty resulting from a $90k 401(k) distribution. If you wait until April 2019 and have a balance due, you could end up with a tax underpayment penalty on top of everything else.