topic Early 401K withdrawal in Retirement tax questions

Early 401K withdrawal

vickiebean — Thu, 30 Oct 2025 20:34:55 GMT

If I am 60 years old, why am I being charged 20% instead of 10%?

Re: Early 401K withdrawal

VolvoGirl — Thu, 30 Oct 2025 20:37:17 GMT

Where? Did the 401K plan take out 20% for taxes when you withdrew it? Or is your tax return taxing you 20% or giving you the 10% early withdrawal pentaly? When did you turn 60? Had to be over 59 1/2 when you withdrew it.

Re: Early 401K withdrawal

xmasbaby0 — Thu, 30 Oct 2025 23:03:42 GMT

Remember, too, that you pay ordinary income tax on the money taken from your 401k. Did you have tax withheld from the distribution when you took the money out?

When you enter it all into the software, the calculations are done to reconcile the amount of income you received and the amount of tax that was withheld. You might owe more or you might get a refund.

Re: Early 401K withdrawal

Opus 17 — Fri, 31 Oct 2025 02:37:44 GMT

Even though you don't owe a 10% penalty, you owe regular income tax on any withdrawal. That tax is calculated on your tax return in combination with any other income, deductions and credits you might have. Your ultimate tax could be anywhere from zero to 36%, depending on your filing status and other income. The 20% is withholding, like from wages, that goes to your credit at the IRS. Your actual tax is calculated on your tax return, and if you paid more withholding than your tax, you get a refund, and if you had less withholding than your tax, you owe an additional payment when you file your return.

Re: Early 401K withdrawal

dmertz — Fri, 31 Oct 2025 03:14:19 GMT

Distributions paid to you from a qualified retirement plan that are eligible for rollover are subject to a statutory minimum 20% federal tax withholding on the taxable amount of the distribution. Default 10% tax withholding only applies to plan distributions that are not eligible to be rolled over.

Distributions made to you after you have reached age 59½ are not early distributions.