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    radsrini's Avatar
    radsrini Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Dec 18, 2007, 05:24 PM
    401 K early disbursement at 33
    I have a 401K amount of 45K which is in rollover IRA since I quit my company. I need the money and want to get an early disbursement. What will be the amount I get after penalty, Federal tax and State (Colorado) tax? Please explain with % info.
    Thanks
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Dec 18, 2007, 08:43 PM
    Four words: DO NOT DO IT!

    You will pay the following taxes:

    A 10% Early Withdrawal Penalty that CANNOT BE MITIGATED! That means you will pay $4,500 in taxes even if you have sufficient deductions to completely offset all the other taxes.

    Assuming you do not have such deductions, you will probably pay 15% in federal income taxes and as much as 10% to the state.

    You could pay as much as 50% in taxes on this distribution, but you will for sure pay at least 25%.

    It is NOT worth it. Keep the money in the IRA and let it grow for your retirement. That was the reason you opened the 401K to begin with!
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #3

    Dec 19, 2007, 12:01 AM
    In some cases there is no penalty for early distribution (before the age of 59½) but it will still be taxed as ordinary income:
    *If distributions are not more than your qualified higher education expenses,
    *You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
    *You are disabled.
    *You use the distributions to buy, build, or rebuild a first home.
    *The distribution is due to an IRS levy of the qualified plan.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Dec 20, 2007, 08:11 PM
    The "buy a first home" exception has a $10,000 limit.

    You can also withdraw from the 401K if you have medical expenses in excess of 7.5% of your income.

    Regardless, DO NOT DO IT!
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