If I withdrawal all of my 401K before I am 59 1/2 do I still have to pay the 10% penalization fee?

Question

-I paid 20% for federal taxes and State taxes when I withdrew the money.

-I used the money to relocate and purchase a new house and house related items...for example: appliances, furniture, blinds, security system...etc.

-I left my former company and instead of rolling over the amount I took out a total distribution and I paid 20% for federal taxes and State taxes.

-I used the money to relocate and purchase a new house and house related items...for example: appliances, furniture, blinds, security system...etc.

Answer 1

It sounds like you may be subject to the early withdrawal penalty.

However, there are exceptions to the additional tax, so I would suggest that you talk to someone familiar with all of the facts and circumstances related to your situation as well as tax regulations .

Here are some links that may prove helpful:

IRS 401(k) resource guide -
http://www.irs.gov/retirement/participant/article/0,,id=151787,00.html

IRS FAQs regarding Hardship Distributions
http://www.irs.gov/retirement/article/0,,id=162416,00.html#5

IRS FAQs regarding Early Distribution Penalty
http://www.irs.gov/faqs/faq5-3.html

IRS Pub 560 - Exceptions to Early Distribution Penalty
http://www.irs.gov/publications/p560/ch04.html#d0e3676

Answer 2

The person who said you don't for a purchase of a house is wrong. That waiver is only available for IRA's and not 401k's.

If you were over age 55 when you left your old job then you also won't be subject to the tax. That's a little different from the 59 1/2 rule that you know...59 1/2 rule applies whether or not you're still employed. It's a little known rule but applicable more often than people realize.

But, if you're younger than 55? Pretty much out of luck unless you took it in installments, died, became disabled, or are paying it to your ex in a QDRO. But those others didn't apply to you.

Hopefully you set aside enough to take care of that 10%...most people forget to or think that the 20% included that number.

Answer 3

unhappy section about doing away with a money disbursement from a defined 401k after age fifty 9 a million/2 is the mandatory 20% Federal Withholding Tax plus yet another @% State Withholding Tax in California... Plus there is the scenario on no matter if in reality the tax deferred contributions are challenge to the 20% Federal Tax purchase any greenback quantity earned above contributions should be in reality challenge to the lengthy time period Capital valuable homes or Dividend Tax at 15% Federal Tax fee? both withholding examples can't be taxed at 20% fee... only ask Mitt Romney's C.P.A.

Answer 4

No, you're stuck paying both federal and state taxes as well as a 10% penalty unless you can roll the money into an IRA within 60 days.

If you have time left more the money into an IRA or see if you can roll the money into a 401k at your new job (if you have one yet) and then take a loan out against it.

Answer 5

Check with the IRS about this. I don't think that a new home, even if it's your first. lets you take out money from a 401-K without penalty.

Answer 6

You're allowed withdraw up to $10,000 to buy a home without penalty if this is your first home.

If your bank took something out to cover an anticipated penalty, you can get that back when you file your return.

Answer 7

Yes, you do.