2007-11-12 05:34:37 · 7 answers · asked by Julie E 1 in Business & Finance ➔ Taxes ➔ United States
Do not do it.
Unless you are about to be homeless, don't cash out.
It will never be worth it.
2007-11-12 05:37:51 · answer #1 · answered by Kristiin Knows 3 · 0⤊ 0⤋
The distribution is taxed at normal income tax rates. If you are under 59 and 1/2 there is a ten % penalty for early withdrawal. There are some exceptions to the 10% penalty rules. Check with your tax advisor.
2007-11-12 05:42:46 · answer #2 · answered by Robert B 2 · 1⤊ 0⤋
A lot depends on your other income.
Assuming that you are under 59 1/2, you would pay ordinary federal income taxes (10-35%), a 10% federal penalty, plus state income taxes (if applicable).
It is not uncommon to lose 40% of your 401k to taxes and penalties if you cash it out.
2007-11-12 05:39:11 · answer #3 · answered by Wayne Z 7 · 2⤊ 0⤋
You pay income tax on the amount at whatever your rate is. If you are under age 59-1/2, you also pay a penalty of 10% of the amount you withdraw.
2007-11-12 05:53:07 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
I believe the IRS assesses a 10% penalty, in addition to the taxes you would have paid on the income had it not been sheltered from them. I remember losing about 20% of the money the last (and I mean last, I'll never do it again) time I did it.
Unless you are completely hard-up, I recommend not doing it.
2007-11-12 05:39:02 · answer #5 · answered by truttman 3 · 1⤊ 0⤋
In the event of you cashing out on a 401k before you have reached 59 1/2 of age, the IRS will consider it an early distribution of your 401k and you may incur a 10% tax penalty (you can visit IRS publication http://www.irs.gov/retirement/sponsor/article/0,,id=151926,00.html for details on the penalty).
very interesting page on 401k
http://hubpages.com/hub/Cash-Out-401k
2007-11-12 05:42:50 · answer #6 · answered by Anonymous · 1⤊ 0⤋
10% plus 10% penalties if you are under 55
2007-11-12 05:36:47 · answer #7 · answered by studio 3 · 0⤊ 3⤋