Traditional IRA

Forum|Forum|2 years ago
July 26, 2023
1 reply
7 views

In Texas, if I withdrew some money from my traditional IRA, how much in taxes would I have to add to the money? If I were to take some money from a 401K, there is a 20 % for taxes and the possibility 10% because I am under 59 years of age; so the total would be 30% overall. Would withdrawing a traditional IRA be the same?

Ask the Experts - Retirement - July 2023

KarenL4

Employee Tax Expert

Hi, Chagris,

Great question. You are correct that if you are under 59.5 when you withdraw the funds from a traditional IRA or a 401K, you may be looking at a 10% penalty on that early withdrawal. This article gives you some of the reasons that may let you escape the penalty for a traditional IRA. 401K's have slightly different rules about avoiding the penalty and you can see those here.

While 401K trustees often withhold federal taxes for you from your retirement plan distribution at a 20% rate, know that percentage is not necessarily the amount the funds will be taxed to you. Your tax will depend on the tax bracket that income places you into (remember to subtract your legitimate deductions before determining your taxable income). In many cases you can request a different withholding amount.

Here is a link that gives you the tax brackets for 2023.

Since you are in Texas, you don't have to fret about state income taxes.

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Best,

Karen

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