Paying with 401k

[Loves2becuddled 0]

I'm planning on withdrawling the money for the surgery out of my 401k. Does anyone know the penalties for withdrawling from a 401k? I figured I'd ask here before I googled it and got lost.

[Thegroovy1 0]

From my understanding, they will take 20% out of the total that you take out. 10% will go directly to the gov't and the other 10% is a penalty for early withdrawl. I am doing the same on Jan 1st. Waiting till then so that I may defer the taxes till next year.

[FFP 10]

I had heard that certain medical expenses might be excluded from the penalty but you should talk to an accountant or tax professional before doing this. Have you considered taking all or part of the money from your 401 (k) as a loan instead of an outright withdrawal? That way, you don't pay the tax on early withdrawal and you don't pay the penalty. The loan is repaid from your salary so you are paying yourelf the interest and these loans don't appear on your credit report. The only downside is that if you leave your job, y0u have to pay back the outstanding amount within 60 days or you are charged the penalty and interest. This may be a better choice financially.

Good luck.

[melissaw1976 26]

If you take money out of your 401k you will have to pay ordinary income taxes. The money you put in is pre tax therefore you have to pay taxes. You also have to pay a 10 percent penalty. Talk to an accountant or tax lawyer if you can!

[losingit919 13]

I used my 401k to pay for my surgery. You can do it as a loan or a withdrawal for medical expenses. It will offset if you claim the medical cost on ur taxes bc u will be taxed if u do it as a withdrawal.

[FLORIDAYS 3,040]

If you have an active 401k it may be smarter to take a loan against it instead of withdrawing it... Loans are usually no more then a few % for the interest and you avoid penalties.... Then the repay,ent comes right out of your chck. Check with your benefits administrator.

[MiniMi 1,468]

Accountant in the house:

401k withdrawal is subject to:

the plan penalty ( whatever the plan penalizes for a withdrawal. Check if they wave it if used for medical)

Income tax ( withdrawal amount multiplied by your tax bracket federal and state. Remember that your tax bracket may be higher now that you have this lump sum distribution from your 401k)

Federal penalty of 10%

If in California additional 2%

If you itemize then you can take the deduction. The deduction is anything 7.5% over your adjusted gross income. So if AGI is $100,000 then anything over $7,500 is deductible.

You have to figure that about 45-50% of what you will withdraw is gonna be eaten up by taxes and penalties.

Taking out a loan is a great way to go IF your plan allows for it. There is interest calculated but guess what? You pay the interest to yourself as it all goes into your 401k account.

Either way, you should run it by your accountant before making the step.