I am leaving my job and want to use a portion of my 401k savings in the meantime. I was told that there is a way to roll the money into an IRA and then withdrawl without penalty. This seems odd to me, but definitely something worth finding out about.
2006-09-23 12:24:52 · 8 answers · asked by Brian C 1 in Business & Finance ➔ Taxes ➔ United States
This is a muti-facited question. If you are 59 & 1/2, you can roll over a 401-K to an IRA. You can withdraw any amount "penalty free", but not "tax free" .
If you are under age 59 & 1/2 you can "annuitize" the entire amounts and begin periodic withdrawals over your life expectancy. However, you cannot change the withdrawal amount until you have attained age 59 & 1/2 and a minimum of 5 years have passed from the 1st withdrawal. Again, this is "penalty free", but not "tax free".
It is possible if your income level is low enough that you might not owe any taxes on the IRA withdrawal, but you would still owe the 10% premature withdrawal penalty if under 59 & 1/2.
I would suggest that you contact a reputable investment advisor (A.G. Edwards, Edward Jones, Merrill Lynch, etc.) They should be able to help you navigate this area.
As a CPA for 31 years, preparing about 250 returns per year for income levels of poverty up to $500,000 per year I wish to reply to the guy that said "only the rich don't pay taxes". We have a "progressive" tax structure. The more you make, the more you pay. What you would call the poor pay little or no income tax (in fact they receive a subsidy known as "earned inome tax credit"). Middle income pays taxes, upper incomes pay a larger precentage of income, and the rich pay the highest as a percentage of income. If your income is above a certain limit (about $200,000) then you lose your itemized deductions and personal exemptions.
2006-09-23 14:31:12 · answer #1 · answered by LTCPA 2 · 0⤊ 0⤋
You have to pay taxes at some point. If you roll your 401K into a Roth IRA, you pay taxes at the time of the rollover, but then the withdrawals are tax free. That might be what you were hearing about. If you roll it into a regular IRA, you pay taxes on withdrawal.
A penalty applies on money you withdraw when you are under 59-1/2. There are some fairly limited circumstances where you might be able to avoid the penalty, but not the taxes.
2006-09-23 22:31:31 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
No. You can roll over into an IRA account, but you can only withdrawl without penalty if you are over 59yrs. And you will be taxed.
2006-09-23 19:34:44 · answer #3 · answered by Vicki B 5 · 0⤊ 0⤋
if you are permantly seperated from you place of emplyment and you're 55 or older you can take your 401 out without penalty but you still have to pay taxes. if you rool it over you can take a portion of it out and just have to pay taxes on the amount you take out. If you're not wealthy you're going to have to pay taxes no matter what youd only the rich can escape paying taxes.
2006-09-23 19:39:46 · answer #4 · answered by roy40372 6 · 0⤊ 0⤋
If you would have had the money taxed before you put it in then it would not now be a problem. If you didnt have it taxed then in order for you to use it, it has to be taxed first, do you understand?
2006-09-23 19:28:25 · answer #5 · answered by lisapj 3 · 0⤊ 1⤋
Don't you wish, you are not going to avoid the tax man like that.
2006-09-23 22:52:28 · answer #6 · answered by TXBLKGRL 3 · 0⤊ 0⤋
not until 59 years old
2006-09-23 21:01:45 · answer #7 · answered by Anonymous · 0⤊ 0⤋
hahahahahahahaa.... no.
2006-09-23 22:44:45 · answer #8 · answered by KariM 2 · 0⤊ 0⤋