Withholding Tax

i wanted to cash in some of my companys portion of a 401 plan. $20k. they said they withold 20% for taxes. $4000 .My tax person said i would owe $1200 more because it puts me in another tax bracket. 15% up to 25% bracket. i needed them to take out $6000 or 30% so i would only owe $29.
At 30% seems it's not worth saving money , out of $20k i only get $14k.
Is this true? or am i and tax person missing something?. Thanks.

What you are missing is that the money is designed to be for RETIREMENT. If you take it out before then, you are taxed AND penalized. That is what you are experiencing.

And if the "loss" you are referring to in the other thread is actually the taxes, again, you pay them because you are being penalized.

They want you to give it serious thought before you raid your retirment for current expenses.

Snipes

if the employers plan offers loan options check them out. in some cases you can borrow upto 50% of your vested balance to a max of $50k i believe.

it has to be paid back within five years and you must treat it as any other loan which means making the monthly payments.

this is better then taking a distribution as snipes mentioned and still a last resort option in my opinion.

good luck

Withholding tax

I have been retired for 9 years, i wanted to take out some of the company's portion for home repairs, plus i'm getting leary of it because it's so high.
I have a lot of assets so and 701/2 is coming up. I saved it for my retirement since SS don't change much, and my pension dosen't change at all.The $20k put's me in the next tax bracket, i just thought 30% was high. Does leave me 70%, I guess there is no way around it, from here on out!.
Thank your for your replies, no penalties apply, but i guess there is.

here's some food for thought, i used this stratgey w/ a retired client of mine. they needed almost $100k for their loser grown childrens needs. she was about to take it from her IRA. that would have put her in a very high tax bracket AND knocked out some other deductions due to AGI limits. plus she would have to have withdrawn nearly $130k just to cover the tax to net $100k.

she got a home-equity line of credit near 5% (deductible mortgage interest) and our plan is to pay it down in 5 years taking an add'l $23k from the ira instead over 5 years. that keeps her in the lower bracket for the 5 years & when i ran the numbers it saved her over $10k over the 5 year period. that's the NET savings between the higher tax bracket, lost deductions and after tax interest paid.

Thank ou all for our help. Very Interesting!.