Does anyone know exactly how much money the government takes from early withdrawl of your retirment funds, I'm in my 40's. I need the cash but want to roll some over too. Let's say I took out 35-60K, Is there any way to get around all the penalty's, Most of this money I get will be for paying debts/creditors, so is there anyway to pay them with out being penalized? Is there a better way to take your retirement funds?
2007-01-31 03:36:05 · 4 answers · asked by K_Seeks4Answers 3 in Business & Finance ➔ Investing
Great advise from all so far.
Retirement was funded from employer, no contributions on my part. It is actually going to be approx. 160K. But I only want to take 30-60K, sorry if that was mis-leading.
I don't own a house, so that will not work. And have not found employment yet, so investing with another company won't work either. I feel the only way to get out of debt and not rely on the government is to take my funds until I find work again. Your right my luck has ran out, at least for the time being, and don't I know it!
2007-01-31 09:38:26 · update #1
10% penalty on pre-mature distributions in addition to income tax if the money is not replaced (or rolled over to another IRA) within 60 days- if the money is in a 401k, you may borrow the money with no penalty - just set up to pay it back.
2007-01-31 03:47:41 · answer #1 · answered by dashel_gabelli 3 · 0⤊ 0⤋
you're out of luck...best way is to roll it all into your new employer then take a loan from that (make sure you can do this though!). It doesn't eliminate the debt and may actually increase your monthly payments but at least you're paying yourself the interest and not the credit cards. Doing it this way also keeps you from incurring a penalty. Lastly it also keeps you from killing your retirement. You'll have to pay it back within 5 years and will be doing so with interest so you're only losing the interest differential between what the plan charges (likely 10.25%) and what you would otherwise have earned.
Doing it this way also means no taxes so no withholding. You can actually take a 30k loan (50% of the 60k) which is just a little lower than what you would have received if you took the cash distribution (60k - 12k withholding - 6k extra tax) and pay off nearly the same amount of debt.
If you can't do that? try refinancing your house (even if interest rate is 1% higher than current rate)...better to do that then decimate your 401k duing your prime earning years. In the next 10 years that 40k is gonna be around 100k and will be at 315 at age 67. If you refinance your house and amortize the payments over the next 25 years you'll still have it paid off by the time you hit 67 and won't have killed your retirement. I'm being realistic here...certainly the extra payment made to the home loan COULD be invested and twist the benefit around but most likely you wouldn't and would spend it. So the benefit still lies in the forced saving of the 401k.
2007-01-31 08:46:36 · answer #2 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
This depends on the type of retirement account. If you are talking about a traditional IRA, 401K, or 403B then you will be assessed a 10% penalty and the money will be taxed as ordinary income. If it is a Roth IRA you can take it out tax free (you already paid taxes on this money). You can also take out a loan from your retirement account. However, this must be repaid with interest.
I would consult with the plan administrator or your financial adviser.
2007-01-31 05:26:46 · answer #3 · answered by Michael 2 · 0⤊ 0⤋
there is at least an excise tax of 10% plus immediate tax on distribution amounts. You can avoid tax for certain emergencies including college tuition i think. Go to smartmoney.com or money.com or other similar sites and do search, there are tons of articles on this topic
2007-01-31 03:49:05 · answer #4 · answered by jim06744 5 · 0⤊ 1⤋