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withdrawing 401k

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augie38

Guest
What is the name of your state? Ca.

My daughter has been unemployed for a year and half. She has finally exhausted all of her benifits and has no income at this time.
She has a small 401k ($3200), that she contributed to at her last job. She has no taxable income this year. She needs money! And I told her to withdraw the the 401k and any taxes that they take out will be should be retuned to her when she files her income tax next year. Am I right in telling her this? What penalties are involved when withdrawing from a 401k, or is it just that the taxes that have to be payed? thanks
 
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ShyCat

Senior Member
The plan administrator will likely withhold 20% ($640) for federal income tax withholding, which would count towards any refund due her when she files her 1040 next year. However, she will be assessed a 10% early withdrawal penalty ($320) when she files, so in the end, the most she'd get back of the withheld amount is half. The state may also assess income tax and penalty on the withdrawal.
 

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