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I will be moving out of state and am looking into withdrawing my 401K to pay my debt and moving expenses since I will be unemployed for a short period of time. I have about $47K in my 401K Plan and $24K in my Retirement Plan. I know I will pay a 10% penalty. Are the tax consequences/penalties the same for both plans? How is it best to find out what my tax consequences will be? I read something in regards to my Plan withdrawing 20% also. Will the 20% and 10% penalty be deducted at the time of the withdraw?
You will have to pay income taxes (both federal AND state) PLUS a 10% Early Withdrawal Penalty on this distribution. At a minimum, you can expect to pay 30% of the distribution on the taxes and penalty (the 20% that is withheld is ONLY A DOWNPAYMENT).
Depending on your tax bracket and the state in which you currently live, the tax bite can be as hgh as 55%.
Given these facts, it is better to pay the expenses on a 20% interest credit card than to access your retirement to pay these taxes.
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