Ask Me Help Desk - 401k taxes/penalties

I am losing my job and want to start flipping houses. In order to do this I need money to pay for my mortgage for at least a year (piece of mind will be priceless). I was thinking about taking money from my 401K when I roll it over to an IRA. I know their are penalties associated with this but I would like to try and find out a specific dollar amount this will cost me in taxes and penalties. How can I find this out? Severance will hold me for 2 months but unemployment will not even cover my monthly bills.

Flippng houses in the current housing market will be difficult at best, and nigh on IMPOSSIBLE in certain housing markets with high foreclosure rates.

You will be competing against well-financed individuals who will be using disposable income to cover their costs, while you, on the other hand, will be cash-strapped and dependent on a quick turnover to meet your expenses.

Off-hand, I suspect your plan is a plan for financial disaster.

As for the costs of your 401K withdrawal, determine what your marginal tax rate is (probably 25%), add your state tax rate (3 - 10%), then add 10%. Simple math shows you will pay AT LEAST 25% and as much as 50% on your 401K withdrawal.

Four words: DO NOT DO IT!

I will use your reply as motivation to succeed in my current endeavor. Thank you for your tax information.

Quote:

Originally Posted by AtlantaTaxExpert

Flippng houses in the current housing market will be difficult at best, and nigh on IMPOSSIBLE in certain housing markets with high foreclosure rates.

You will be competing against well-financed individuals who will be using disposable income to cover their costs, while you, on the other hand, will be cash-strapped and dependent on a quick turnover to meet your expenses.

Off-hand, I suspect your plan is a plan for financial disaster.

As for the costs of your 401K withdrawal, determine what your marginal tax rate is (probably 25%), add your state tax rate (3 - 10%), then add 10%. Simple math shows you will pay AT LEAST 25% and as much as 50% on your 401K withdrawal.

Four words: DO NOT DO IT!