taxes and penalties on 401K

[karen12562]

What is the name of your state? Texas
I recently quit my job of 15 yrs. If I withdraw my 401K, do you have any idea of how that will be taxed and penalized? I REALLY hate to withdraw it but I am going to have to, to pay my bills until I can find another job. BTW, I only quit because I knew for a fact that they were going to fire me and I didn't want to put that I had been fired on my other applications.

 

[Snipes5]

It will be taxed at your marginal tax rate, whatever that is, probably 25% if you take out a bunch from the 401k, AND a 10% penalty on top of that.

Don't take it out if you have ANY other method of dealing with your bills, including a credit card or borrowing from someone.

Snipes

 

[pojo2]

Isn't there also a mandatory 20% deduction from the funds right off the top for Federal Taxes?

 

[Snipes5]

It is WISE to have 20% withheld for tax purposes, but no, it isn't mandatory. The withholding isn't the actual tax paid, but can help you from having additional penalties for underpayment of tax.

Many people are confused on this issue. The tax is actually "settled/paid" on the tax return. Any amount withheld when the money is paid out is just that, withholding.

Snipes

 

[karen12562]

O.K.---thanks for the advice. My credit is excellent (just want to keep it that way) so I should have no problem borrowing from the bank. My brother will cosign if they don't want to give it to me without a job. I just hated to add another payment. But I will use the 401K as a last resort. Hopefully a job will come along soon! Thanks again.