I am 66 and retired
I want to withdraw my 401K in a lump sum in order to pay off a huge debt. Will I be penalized for that? Most of it will go for paying off my house

By the way I can leave it in there
Or take a lumb sum
Or roll over
My health is not the best so I would like to get out of debt. I do Start SS this next month and have 2 small retirement checks

Once you are beyond age 59-1/2 you can take as much out of your 401(k) as you want without penalty. You do of course have to pay income tax on any withdrawal, but there is no additional penalty.

There should be no penalty, you will have to pay the tax on it, so keep enough of it back to pay the tax on the amount you withdraw

They said they keep 20% out is that about right?

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Originally Posted by LottaKind

they said they keep 20% out is that about right?

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20% is the typical amount of withholding on distributions like this. But the actual amount of tax you will owe is dependent on your tax bracket. If you take out a big chunk all at once you may very well end up with an adjusted gross income figure that puts you in a higher bracket than you are used to, and so that 20% my actually not be enough. In addition, depending on where you live, you may also have state/local income taxes to pay, and they do not wihhold for that. If your anticipated state/local taxes on this is more than a few hundred $, I would recommend doing an estimated tax payment so that you don't forget and find yourself facing a big tax bill in April 2011.