I am a grad student who has returned to school and need money. I have no further loans available to me and need money for housing expenses. I accrued some money from my fomer employer's 401k. I don't need the 'DONT DO IT!" lecture, I know it's not a great option. I just need to someone to tell me reallistically what percentage of the balance I will receive, approximately. I made under 35k at my current job this year before returning to school if that helps with taxes. Do I pay the taxes before I receive the money or in April when I do taxes? Thanks for the help. Knowledgeable answers only please.

You won't get your money immediately but will have to wait awhile to get it - unlike a bank where you walk in with a withdrawl slip.

When you make a withdrawal they will automatically withhold 20% for federal taxes. So if you request a withdrawal of , say, $10K you will actually receive $8K. They do not withhold the 10% early withdrawal penalty, so that bit you will have to pay yourself next April. When you file your taxes you add the $10K to your income, include the $1K penalty, and include the $2K that was withheld as taxes already paid. If your total income is in the $45K range (that's $35K from your job plus $10K for the 401(k) withdrawal) and you are single, you would be in the 25% tax bracket. Add the 10% penalty and that means the 20% withheld is short of what you owe by 15%, so you will have to pay that amount yourself in April. Which means out of the $10K withdrawal you shouldn't spend more than $6500, or you will lcome up short inApril. Also, if you live in a state that has an income tax you will have to pay that as well - state tax is NOT automatically withheld from the distribution. State tax rates vary widely, so I can't tell you how much of the distribution to save for that.

One thing to consider - if you are no longer working for the employer where you have the 401(k) account, you might should consider rolling it to an IRA account, and then take the withdrawal from the IRA. Reason is that withdrawals for higher education purposes are exempt from the 10% early withdrawal penalty from an IRA, but not from a 401(k). I suggest you talk about this strategy with any one of the many investment houses that can manage the rollover for you into an IRA (Fidelity, Vanguard, T. Rowe Price, Schwab, E-Trade, etc) - you don't want to roll over into an investment that won't let you take the distribution in the time frame you need