| Posted By |
Message |
gporka23
:)
Member since 11/08 3783 total posts
Name:
:)
|
401K Cash Distribution Question
Please help! Although I am a financial Analys I am CLUELESS when it comes to 401k & taxes!
I left my old job 3 years ago and never rolled over my 401k from there. It is a small amount of money (just under 10k) and instead of rolling this over I was looking to take a cash distribution instead. I know that 20% is taken out for Federal Tax Withholding and another 10% for early distribution (before the age of 59). I am ok with this as this money would really help us pay off debt that I am currently paying a high interest rate on.
Basically my question is.. if I do this how will this affect me at the end of the year when it comes to my taxes? Am i really just screwing myself in the end?
Thanks 
|
Posted 9/9/10 3:49 PM  |
| |
|
Long Island Weddings
Long Island's Largest Bridal Resource |
lullabella
LIF Adult
Member since 5/05 2246 total posts
Name:
|
Re: 401K Cash Distribution Question
Posted by gporka23
Please help! Although I am a financial Analys I am CLUELESS when it comes to 401k & taxes!
I left my old job 3 years ago and never rolled over my 401k from there. It is a small amount of money (just under 10k) and instead of rolling this over I was looking to take a cash distribution instead. I know that 20% is taken out for Federal Tax Withholding and another 10% for early distribution (before the age of 59). I am ok with this as this money would really help us pay off debt that I am currently paying a high interest rate on.
Basically my question is.. if I do this how will this affect me at the end of the year when it comes to my taxes? Am i really just screwing myself in the end?
Thanks
You also have to pay state tax. I would be sure to put away enough to cover it all.
|
| Posted 9/9/10 4:07 PM |
| |
|
Peaches77
LIF Adult
Member since 1/10 993 total posts
Name:
Me
|
Re: 401K Cash Distribution Question
You have FM.
|
| Posted 9/9/10 4:09 PM |
| |
|
Superkat
More a stranger than a friend
Member since 5/06 9730 total posts
Name:
K
|
Re: 401K Cash Distribution Question
As a high level estimate, you will lose 40+% of the money you have in the account. State tax, federal tax, penalty etc. Unless you have no other options, I would avoid the distribution.
|
| Posted 9/9/10 10:34 PM |
| |
|
Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
|
Re: 401K Cash Distribution Question
If you really need the money take it but understand you will come out with a bit over half of it. If you are ok with that theyn go for it.
If you don't need it, roll it into an IRA.
You can ask them to withhold but I would put half of it away for tax time.
|
| Posted 9/10/10 8:38 AM |
| |
|
gporka23
:)
Member since 11/08 3783 total posts
Name:
:)
|
Re: 401K Cash Distribution Question
Thanks
I am not going to do it... after looking into it, it really is not worth it. Thanks for all the help though!
|
| Posted 9/10/10 8:58 AM |
| |
|
mommy2Alex
3 babies for me :)
Member since 5/05 6683 total posts
Name:
|
Re: 401K Cash Distribution Question
Posted by gporka23
Thanks
I am not going to do it... after looking into it, it really is not worth it. Thanks for all the help though!
I think this is a good decision. At my old job we used to have financial advisors come in on an annual basis and they always said loans against your 401K or early distributions were a a bad financial decision. Also, I am sure you lost a lot of value in the account with the Oct '08 market crash so to take an early distribution would compound the loss with the taxes you would have to pay on it.
|
| Posted 9/10/10 9:07 AM |
| |
|
christinec2010
LIF Adolescent
Member since 10/09 637 total posts
Name:
Christine
|
Re: 401K Cash Distribution Question
You will have to pay state tax.
I did this last year & specifically told them to withhold state tax too but they didn't listen & I owed money to the state.
|
| Posted 9/10/10 9:22 AM |
| |
|
MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
|
Re: 401K Cash Distribution Question
Posted by gporka23
Thanks
I am not going to do it... after looking into it, it really is not worth it. Thanks for all the help though!
so happy to read this!!
|
| Posted 9/10/10 9:25 AM |
| |
|
