2007-09-03 16:24:24 · 6 answers · asked by kollage 2 in Business & Finance ➔ Personal Finance
Roll it over before you start taking it out, depending on what you rollover into will also have an effect on the taxes you pay.With a rollover into the right investment vehicle you can rest assured not to outlive you benefits.
2007-09-03 16:30:28 · answer #1 · answered by Anonymous · 0⤊ 0⤋
If you withdraw directly from your 401k you are subject to the 20% Mandatory Federal Tax Withholding upfront. Depending upon your entire tax portfolio you may be due a refund of overpayment or owe additional taxes when you file.
You may want to consider requesting a Direct Rollover/Transfer of your 401k to a Traditional IRA (Rollover or Conduit) upon retirement. When taking distributions from this type of plan you have a choice to have the taxes withheld upfront or to defer it to when you file as well as the amount you wish to withhold.
Also, once the funds are in a Traditional IRA, you have the option of converting it to a Roth IRA. You are taxed on the amount being converted in the year in which the conversion takes place. After a 5 year holding period, withdrawals from a Roth IRA are tax-free to you and your future beneficiary.
With any of the above scenarios, tax advice is highly recommended. There are many rules and restrictions which may apply to your current tax situation.
2007-09-03 18:42:18 · answer #2 · answered by christyn79 5 · 0⤊ 0⤋
You are taxed at your normal tax rate for the withdrawl depending on what your total adjusted gross income is for that year. In other words, if the contributions were before-tax, then the withdrawls are taxed like ordinary income.
There are many nuances here - check out this site for more information.
2007-09-03 16:32:46 · answer #3 · answered by Mike 3 · 0⤊ 0⤋
You are taxed at what ever income bracket you fall into when you start drawing on your 401k. If you want to avoid tax complications open a Roth IRA...you are not taxed on it when you draw out and you are not taxed on any growth....great stuff.
2007-09-03 17:23:18 · answer #4 · answered by Anonymous · 0⤊ 0⤋
It depends on what income tax bracket you're in when you take it out.
Be careful, the withdrawal can move you into a higher bracket also-check with your tax adviser.
2007-09-03 16:34:14 · answer #5 · answered by Tom C 1 · 0⤊ 0⤋
Depends on what your other income is and what tax bracket you fall into .
>
2007-09-03 16:29:48 · answer #6 · answered by kate 7 · 2⤊ 0⤋