Cashing out a 401K?

Question

How can I find out how much I would have to pay in taxes to cash out my 401K?

Do you have to pay state and federal? Can the bank do it for me or do I have to take care of it on my own when I file my taxes?

I live and work in MA.

THANKS!!!!

Answer 1

YOu have to pay both state and federal taxes. If you cash out a 401K (you have to no longer work at the place where you have it or you have to quallify for a hardship withdrawl) then they are required to withhold 10% of the amount for taxes. You will probably owe more. There is an additional 10% penalty for early withdrawl that you will owe when you file your taxes. So count on 20% minimum. If you are in a higher tax bracket, you may have to pay even more. A good option is to roll over the 401K into an IRA. Then you can withdrawl without the mandatory 10% withholding. However, you will still owe the money at tax time.

Answer 2

First, how old are you?

If you are under the age of 64, you will have to pay a 10% early withdrawal penalty.

No matter what your age, yuo will have to pay both federal and state taxes. The contributions to a 401k are from pre-tax income - you have not paid income taxes on them even though they are income. A 401k is a tax deffered investment vehicle, NOT a tax free one(there are no tax free investment vehicles).

If you left your job and want to move the money, roll it over to an IRA, any bank or investment firm can do this for you. This will allow you to keep the tax deffered status until retirement and avoid the penalty.

Answer 3

Actually, if you are under 59 1/2 you will incure an extra 10% penalty from IRS. State, FED taxes too. Smartest way if to rollover. Free to do this with most companies, no tax penalties, and not hard to do at all if you have someone do it that knows what they are doing. Then take out 10 - 20% a year and deal with the taxes at the time of withdrawal or the end of the year. That will help you space out the tax liability while your money is still growing. I can put you in touch with someone in your area that can handle all the paperwork for you with no fees.

Answer 4

By gawrsh, No. You can do it, yes, you can. But.....you not only lose the momentum of your investment in your long-term plan, but you lose REAL dollars now! You don't get to take out the unvested money. Only vested contributions (or your own salary deferrals). The penalty is that you pay regular income tax on the amount you withdraw. THERE IS NO PENALTY of 10% for first time homebuyers. So if you are in the 25% bracket, YOU LOSE not only the $1750 now, but you lose the GROWTH of that $1750 for the next 40 years. (BTW, at a nominal 10% growth, you're giving up $95,000 future dollars!) If you have decent credit, you can oftentimes get 100% loans or in some places 105% loans. While the money is expensive, usually you'll find that your income will increase over the next few years rapidly and it'll feel like nothing soon. One day, you'll even refinance or sell the house--long before you pay off the 30 year mortgage over the whole 30 years! My advice: KEEP YOUR RETIREMENT MONEY OFF LIMITS (til you retire, that is!) The WealthBuilder Tax Specialist

Answer 5

First of all, it is not smart to cash out an 401k before 59and 1/2
with 10% penalty on top of federal, state tax could run as high as 47%.
for the sake of conversation if you had 10k, you willing hand out Uncle Sam 4700.00?

Answer 6

You will be responsible for federal income tax(what ever bracket you end up in) and state and local income tax for the funds. Plus you will be responsible for a %10 penalty from the feds for early withdrawal unless it is for one of the approved reasons that would make you exempt from the %10 percent. Check with the IRS for approved reasons. You employer may take all the taxes out for you so you won't have that worry come April, ask them if they will.

Answer 7

My husband just cashed his out from a past job and he paid fed and state taxes. You contact the people you have the plan with and you have the option of rollover or cash it out. The rollover process is like this: Wait for paper work,fill it out,send it to your current plan holder, wait for confirmation paperwork, fill it out,ETC. Cashing it out is much easier.

Answer 8

Check with your financial institution. Some will do it for you some will not. I don't trust banks to do anything and it won't be the Bank that gets in trouble with the IRS it will be you. A bank is only in business to make money off of it's customers and they are liable for nothing.

Answer 9

i live in ia. and i cashed out my 401k it was 30% in taxes to do so. call the company they will fill you in.