topic Re: 401k withdrawal in Retirement tax questions

401k withdrawal

rouge_prince001 — Mon, 09 Mar 2026 08:36:33 GMT

I took a withdrawal from my 401k after I turned 59 1/2. I used the three-year rule method, though I'm not sure of which method to use. I'm not retired; I'm still working for the same company. With the 3-year rule, turbo-tax is asking, in the New Jersey portion, for numbers for "annuity cost (basis)" and "cost recovered in prior years."

What am I calculating to put there? Am I using the correct method --- the 3-year or the general method for a 401k withdrawal? The hyperlinked note doesn't tell me what I need to do. Help!

Rouge Prince 001

Re: 401k withdrawal

MaryK4 — Wed, 09 Mar 2022 22:19:09 GMT

To start, if all contributions to your 401(k) Plan were made on or after January 1, 1984, they were not included in income when they were made, unless the contributions exceeded the federal elective deferral limit and the full amount is taxable now.

The New Jersey three year method works if you will receive an amount equal to or greater than your pension and annuity contributions within three years (36 months) from the date you receive your first payment from the plan. If you are not yet receiving regular payments yet, it may or may not benefit you.

With the three year option, you can take any amounts you contributed untaxed instead of having to use a prorata formula.

Re: 401k withdrawal

rouge_prince001 — Thu, 10 Mar 2022 03:40:56 GMT

Thanks for the response, but I'm still lost. I'm being asked for the cost of an annuity and cost recovered in prior years. I took money from my 401k, not an annuity. I don't understand what I'm being asked. What is cost of annuity? What is cost recovered in prior year? The links to the 401k info does not explain what needs to be entered and where.

Rougeprince001

Re: 401k withdrawal

DawnC — Thu, 10 Mar 2022 04:28:56 GMT

You should not be getting those questions for a 401K distribution. Go back to the federal section and review your 1099-R entry. Next to box 7, there is a box that says IRA/SIMPLE/SEP, is it checked on your 1099-R? It should not be checked on the form or in TurboTax if it was a 401k withdrawal.

Search for 1099-R and select the Jump to link in the search results. Then click on Edit next to your 1099-R to review it. You may want to delete that 1099-R and re-enter it from scratch.