Taxation on early retireme t withdrawal

[cabbylhill]

My husband is planning on withdrawing $120,000 from his Fidelity 401K retirement account as an early withdrawal. He is 52 yrs old. How much will we be taxed for this early withdrawal? Also, how much should we save back to pay federal and state taxes for this year when filing taxes in February of 2019? Sincerely, Shelly

[macuser_22]

That will be taxable as ordinary income at whatever tax bracket you will be in.  There is not way to answer without knowing all other income and your estimated AGI.    Add to that a 10% early distribution penalty. 

For example, if you will be in the 24% tax bracket then figure that about 34% will be taxable.  State tax if it applies will be additional.  Note that the $120K might (will probably) push you into a higher tax bracket.

Unless you have an immediate need for the money it might be better roll it tax free into a Traditional IRA and then take smaller distributions as needed.

[Anonymous]

you husband may also want to check to see if he can take a loan from his 401k.  the loan would not be taxable.  he must pay interest on it and generally has 5 years to pay it back unless used to buy principal residence.  tell us the reason for the withdrawal because certain exceptions may apply to avoid penalty. 

[SweetieJean]

If Hubby is still employed at that company, there may be limits of how much he can withdraw (or even if he can do so at all).

[dmertz]

If the 401(k) plan permits a loan, the maximum loan allowed under the tax code is $50,000.  To avoid the loan potentially being limited by the available 401(k) balance, the loan of $50,000 would be taken first, then a distribution of the other $70,000 would be taken probably as a hardship distribution if still working for the company.