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Level 1

I am no longer employed we are considering an early withdrawal of my 401k as it's not needed. What type of penalty and tax can I expect federal and state (VA)?

 
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Level 20

I am no longer employed we are considering an early withdrawal of my 401k as it's not needed. What type of penalty and tax can I expect federal and state (VA)?

This question is impossible to answer due to lack of information ... so some general stats ... the distribution will be taxed by the feds as ordinary income at whatever marginal rate the income puts you and if you are under the age of 59.5 there will also be a 10% penalty added  plus any state taxes applicable.

 

You could roll the 401K to an IRA and then take distributions as needed instead of all at once to spread the tax burden over more than one tax year.  This is something you need to compute before you take the first dollar so you know exactly how this will affect you.

 

Try these tools:

http://www.irs.gov/Individuals/IRS-Withholding-Calculator  

 https://turbotax.intuit.com/tax-tools  

http://turbotax.intuit.com/tax-tools/calculators/taxcaster  

Level 18

I am no longer employed we are considering an early withdrawal of my 401k as it's not needed. What type of penalty and tax can I expect federal and state (VA)?

"an early withdrawal of my 401k as it's not needed" - what does this mean - "it's not needed"?

 

It is a curiosity that when you leave your employer, you do not have to withdraw from your employer's 401(k) plan. The employer will continue to administer the plan and pay any administration expenses.

 

However, it is not uncommon for taxpayers to roll the 401(k) amount to an IRA. Why would you do this? One reason is that you have more control over the IRA in terms of choosing the IRA custodian and the types of investments that are available to you - in the case of the 401(k), you are allowed only what the employer chooses to allow you. There are other pros and cons between 401(k) plans and IRAs, which we can talk about if this is a concern.

 

NOTE: if the amount of money in your 401(k) is under a certain limit, your employer can forceably "cash you out", that is, send you a check for the amount of the 401(k) plan and close it. In this case, you either declare this as income, or you have 60 days (from the date of the disbursement) to roll this amount into an IRA tax-free.

 

But I am curious why you feel that declaring the income is your only option.