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sometimesmommy
Always in my heart.....
Member since 11/06 6686 total posts
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401K question
We need to withdraw approx 8K (no other option avail). If at a later date DH ups his contribution % and recontributes said 8k over the next few month I assume that would help with our tax liability no??? I know it wouldnt break even but it would reduce taxable income at the end of the year right???
ETA: I hope this makes sense what I am saying.
Message edited 8/2/2010 10:41:56 AM.
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Posted 8/2/10 10:41 AM  |
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MarathonKnitter
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Member since 2/07 17374 total posts
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Re: 401K question
are you borrowing the money from your 401(k) or are you taking a distribution???
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| Posted 8/2/10 11:16 AM |
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sometimesmommy
Always in my heart.....
Member since 11/06 6686 total posts
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Re: 401K question
Posted by libby2595
are you borrowing the money from your 401(k) or are you taking a distribution???
Distribution/withdrawl.
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| Posted 8/2/10 4:54 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
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That Led To The Wrong Tendencies
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Re: 401K question
If you put that same amount back into your 401k, it will reduce your tax liability.
The problem with the withdrawal is the penalty you have to pay to take the money out. Isn't it something like 15%? That's a lot.
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| Posted 8/2/10 5:12 PM |
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annoyedTTCer
LIF Adult
Member since 4/09 3272 total posts
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Re: 401K question
Posted by sometimesmommy
Posted by libby2595
are you borrowing the money from your 401(k) or are you taking a distribution???
Distribution/withdrawl.
Better to take a loan out, then there is no penalty.
However if your DH leaves his firm before the loan is paid off he must pay it off or pay a penalty on the balance
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| Posted 8/2/10 5:17 PM |
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sometimesmommy
Always in my heart.....
Member since 11/06 6686 total posts
Name:
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Re: 401K question
Posted by ave1024
If you put that same amount back into your 401k, it will reduce your tax liability.
The problem with the withdrawal is the penalty you have to pay to take the money out. Isn't it something like 15%? That's a lot.
Its 10%. We are fine with that.
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| Posted 8/2/10 7:29 PM |
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sometimesmommy
Always in my heart.....
Member since 11/06 6686 total posts
Name:
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Re: 401K question
Posted by annoyedTTCer
Posted by sometimesmommy
Posted by libby2595
are you borrowing the money from your 401(k) or are you taking a distribution???
Distribution/withdrawl.
Better to take a loan out, then there is no penalty.
However if your DH leaves his firm before the loan is paid off he must pay it off or pay a penalty on the balance
Not an optio to take a loan. We took one when I was in thehospital so cant :(
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| Posted 8/2/10 7:38 PM |
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MarathonKnitter
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Member since 2/07 17374 total posts
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Re: 401K question
ask your employer and the tpa if they'll do a combo loan... it's refinancing the original loan.
it's not an option that's talked about publicly or advertised, but they do exist, sometimes.
it's worth a shot to ask. i work for a company that manages 401(k)s and we do them... again, we don't go around saying that they can be don, because they're a bit of a hassle. the worst they can tell you is no.
and i agree with the other info said, even if you put in $8k into the plan, it does not do away with the penalty.
best of luck to you in dealing with the issue that has made you make this decision
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| Posted 8/2/10 7:58 PM |
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CookiePuss
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Member since 5/05 14007 total posts
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Re: 401K question
Posted by sometimesmommy
Posted by ave1024
If you put that same amount back into your 401k, it will reduce your tax liability.
The problem with the withdrawal is the penalty you have to pay to take the money out. Isn't it something like 15%? That's a lot.
Its 10%. We are fine with that.
It's 10% plus your oridinary income rate so if you marginal tax rate is 20% - you are paying 30% in just Federal. Then you have to tack on state tax.
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| Posted 8/3/10 10:45 AM |
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annoyedTTCer
LIF Adult
Member since 4/09 3272 total posts
Name:
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Re: 401K question
Are you sure you can do a distribution?
I don't think my job lets us close or do distributions, only loans if we are still here.
I'm home on maternity leave so I don't have our exact rules in front of me but I seem to recall that coming up at some point with one of my direct reports
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| Posted 8/3/10 11:03 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: 401K question
Posted by shamrock124
Posted by sometimesmommy
Posted by ave1024
If you put that same amount back into your 401k, it will reduce your tax liability.
The problem with the withdrawal is the penalty you have to pay to take the money out. Isn't it something like 15%? That's a lot.
Its 10%. We are fine with that.
It's 10% plus your oridinary income rate so if you marginal tax rate is 20% - you are paying 30% in just Federal. Then you have to tack on state tax.
Yes but that goes back to the original point... if she puts that money back into her 401k later in the tax year... the federal and state tax owed should cancel itself out. (only pay the penalty)
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| Posted 8/3/10 11:06 AM |
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sometimesmommy
Always in my heart.....
Member since 11/06 6686 total posts
Name:
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Re: 401K question
Posted by ave1024
Posted by shamrock124
Posted by sometimesmommy
Posted by ave1024
If you put that same amount back into your 401k, it will reduce your tax liability.
The problem with the withdrawal is the penalty you have to pay to take the money out. Isn't it something like 15%? That's a lot.
Its 10%. We are fine with that.
It's 10% plus your oridinary income rate so if you marginal tax rate is 20% - you are paying 30% in just Federal. Then you have to tack on state tax.
Yes but that goes back to the original point... if she puts that money back into her 401k later in the tax year... the federal and state tax owed should cancel itself out. (only pay the penalty)
We spoke to Trowe today and they said if we redeposit the money back into an IRA within 60 days. It cancels everything out including penalty-we would have 20% tax credit since they take 20% automatically when you initiate a withdrawl.
I learned alot today.
Thanks for your help ladies.
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| Posted 8/3/10 12:26 PM |
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MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
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Re: 401K question
Posted by sometimesmommy
We spoke to Trowe today and they said if we redeposit the money back into an IRA within 60 days. It cancels everything out including penalty-we would have 20% tax credit since they take 20% automatically when you initiate a withdrawl.
I learned alot today.
Thanks for your help ladies.
i would double-check this. seriously!
it depends on the reason for the distribution. if you're taking a financial hardship, that option is not available. another thing: IF it can be done, IRAs are capped at $5000, and that is if you meet the income qualificaitons.
i really don't think it's as easy as it was told to you.
please, double-check
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| Posted 8/3/10 1:32 PM |
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