I have an exesting loan through the 401k for 20,000 will I get penalized for the full amount of the plan even if she get's half through the dissolution???? I need whatever is left to put in a saving's acc. to get going again.
2006-11-04 10:30:22 · 5 answers · asked by Marty S 1 in Business & Finance ➔ Personal Finance
The other answers forget..
Rule 72 (IRS) allows u to pull the $$$ from IRA (assume it applys to 401k too)...
It allows u to get it before 59.5 with only taxes to pay if u do it over a specified period of time.
For example u pull 40k out but do 4k per year for 10 years.
This is a way get $ out before 59.5 without penalty.
IRS recongizes that there are life events that force many to grab funds from existing sources for emergencies.
U could use this rule to pull out 100% of the 401k, and use portion for wife and portion for self.
2006-11-04 11:55:59 · answer #1 · answered by pcreamer2000 5 · 1⤊ 0⤋
You only pay tax on what you keep. I was going to send you the IRS link to that info, but it doesn't seem to be on the website. If I run across it I'll edit my answer. But I teach classes on retirement accounts and IRA's, and the IRS does make an exception to the tax/penalty rule in the case of court orders and divorce. Your best plan with that is going to be to talk to your attorney or a tax professional who is experienced in the matter. H&R Block should be able to help you if you call ahead and ensure you get the right person. They also don't charge for someone to tell you whether or not this is taxable.
But please be careful. That's an awful lot of money tohave to pay tax and penalties on if you're already in a financial bind. In that case, without any other info, you'll pay at least 25% of what you take out in taxes. That's $10,000 in taxes and penalties. It may be more or less depending on your individual situation, but I would encourage you to try and find some other way of dealing with things. Uncle Sam doesn't deserve your money, you do.
Is it possible that you could tighten your belt a little and live on less? Buy a used car to drive for a while, scale down the cable TV, make your own coffee (Starbucks about had me in a vice grip for a while:)). I'm also going to send the link to the Dave Ramsey website. He has a great plan for getting on a budget and getting out of debt. You sound like you're in pretty deep, and unless you know you're going to be in a very different situation very soon, I would start making some changes to get back on track. Please let me know if I can be of further service. :)
2006-11-05 00:50:00 · answer #2 · answered by Katie Short, Atheati Princess 6 · 0⤊ 0⤋
I'd be surprised that you would be forced to pay her half of the 401K before you are even eligible to take w/drawals. Check w/ your atty......It should be something like 1/2 of TODAY's value (or date of divorce) that you would have to start paying when you are 59 1/2.
If you are forced to pay her in full before you are elibigible - the total penalties would be about 40%.
I'd concentrate on paying back the existing loan ASAP so the interest can pump up the balance faster. AND , don't ever ever borrow from it again!!!
2006-11-05 01:45:16 · answer #3 · answered by Paula M 5 · 0⤊ 1⤋
If you are not 59-1/2 there is going to be penalties of about 30% for early with drawl.
2006-11-04 10:47:40 · answer #4 · answered by Anonymous · 0⤊ 1⤋
If it's a before tax plan, you're going to have to pay the penalty plus taxes which will leave you with nothing.
2006-11-04 10:42:52 · answer #5 · answered by Anonymous · 0⤊ 1⤋