I Have 27,500 In My 401k. How Much Would I Get Penalized For Taking It Out?


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Anonymous answered
To answer your question you will likely be penalized 10% by your investment bank/gov if you are below 59 1/2 years of age.
To see the real loss you feel you have to determine 2 things.
Did you make investments pre or post tax.
If you did them post tax you will not have to pay those taxes again in a new period.
If you were pre tax like most people....
401(k)'s hold 20% to give to the government/Fed in tax witholding.  This is done to ensure you pay your tax and to ensure the government gets paid.  If they didn't withhold this amount they likely wouldn't collect much...
Let's look a little further into you getting 'penalized'
You will need to determine what your tax bracket is for tax purposes
Let me explain;
It works this way....
Lets say you make 100,000.00 a year and you are taxes by the fed 25% and by state 5%
Then you withdraw 27,500.00 from your 401k
Your new annual income is 127,500.00

So you need to determine what your new income is for tax purposes.
Your fed tax bracket may have risen to lets say 30% and state still 5%
Now you will owe 35% when tax time comes around

So your 27500.00 = 27,500.00 x .10(penalty) x .20 to fed = 8250.00
19250.00 is what your check will likely look like.

You will have a choice to put more to the government upfront and you probably should before you go spending...REMEMBER you still owe the rest of the tax on your INCOME when tax time comes around.

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