401k cash out: Are the taxes refundable?

[Viper GTS]

My company is being purchased by another company (second time in as many years) & I'm considering cashing out my 401k. I'll be laid off here in a few months anyway, & was already planning on cashing it out.

I know I'll be paying a 10% early withdrawal fee + 20% federal taxes (deducted before I ever see it).

Would the excess tax included in the 20% be refunded next year, or is that 20% just gone?

Viper GTS

 

[FoBoT]

if they withhold 20% , how much you really pay is determined when you file next year

so you may get some back or have to pay more depending on your overall refund/tax picture next year when you file

 

[GasX]

the money you are taking out is now income. The 20% is (more or less) the government's insurance that you will pay tax on it...

 

[Argo]

Why won't you rollover when you get a new job, instead of cashing out?

 

[Homerboy]

Originally posted by: Argo
Why won't you rollover when you get a new job, instead of cashing out?

Yeah roll it over... thats what I did and now the $ is in the hands of a competant person... already up to a smoking $35K from $27K just ~1yr ago.

Its ridiculous to cash it out... why would you pay 20%+ on it plus penalties?!

 

[Bryophyte]

Yeah, like the others said, roll it over. The catch is that you can't touch the money...in other words, have the check sent directly to the new acct without you being the middle-man. Then you get no penalties.

 

[Yossarian]

even if you don't roll it over into another company's plan, you can still roll it over into a personal IRA. unless you desperately need that money now don't touch it.

 

[GasX]

Originally posted by: Yossarian
even if you don't roll it over into another company's plan, you can still roll it over into a personal IRA. unless you desperately need that money now don't touch it.

Absolutely, I have all my 401k's from past jobs rolled into one IRA that I control.

 

[Viper GTS]

I'm well aware of the rollover benefits, & I do need the money.

I owe too much.

Starting next week I'll be working 80 hour weeks, for the same reason.

Viper GTS

 

[Buttzilla]

Originally posted by: Yossarian
even if you don't roll it over into another company's plan, you can still roll it over into a personal IRA. unless you desperately need that money now don't touch it.

thats what i was about to say... roll it into a peronal IRA.

 

[DaveSimmons]

Cash out now, catfood when you retire. yum!

Roll it over at www.vanguard.com and get some VFINX (S&P 500 index fund).

If you must loot your retirement savings, you should at least put $3K into a Roth IRA for 2003 if you can get enough money for it by 4-15. You can contribute to a Roth even in years when you have a 401k program, as long as your income isn't too high (around $100K for singles) and the Roth will grow tax-free (unlike tax-deferred 401k).

 

[Homerboy]

Originally posted by: Viper GTS
I'm well aware of the rollover benefits, & I do need the money. I owe too much. Starting next week I'll be working 80 hour weeks, for the same reason. Viper GTS

But you will also need the money more when you're retired in X years (SS is dead and now they say medicare is bankrupt by 2019!... keep those IRAs... its ALL YOU WILL HAVE!!!)

 

[Viper GTS]

Originally posted by: Homerboy

Originally posted by: Viper GTS
I'm well aware of the rollover benefits, & I do need the money. I owe too much. Starting next week I'll be working 80 hour weeks, for the same reason. Viper GTS

But you will also need the money more when you're retired in X years (SS is dead and now they say medicare is bankrupt by 2019!... keep those IRAs... its ALL YOU WILL HAVE!!!)

Right now my debt & relative lack of education are hurting my retirement far more than the $5K I have in my 401k are helping it.

I'm 21, BTW, if that changes your advice any.

Viper GTS

 

[Homerboy]

Originally posted by: Viper GTS

Originally posted by: Homerboy

Originally posted by: Viper GTS I'm well aware of the rollover benefits, & I do need the money. I owe too much. Starting next week I'll be working 80 hour weeks, for the same reason. Viper GTS

But you will also need the money more when you're retired in X years (SS is dead and now they say medicare is bankrupt by 2019!... keep those IRAs... its ALL YOU WILL HAVE!!!)

Right now my debt & relative lack of education are hurting my retirement far more than the $5K I have in my 401k are helping it. I'm 21, BTW, if that changes your advice any. Viper GTS

Tax free is tax free... I dunno its a very tough call. Im in debt too (some what) and would never consider touching my 401K unless there was an ultimate dier emergency with my kids, wife, me etc... Then again my family would probably float me rather than let me cash my 401K. (im only 29 FYI)

 

[EagleKeeper]

Originally posted by: Viper GTS
I'm well aware of the rollover benefits, & I do need the money.

I owe too much.

Starting next week I'll be working 80 hour weeks, for the same reason.

Viper GTS

Better to roll it over into an IRA that you control.

Then do the withdrawl.

That will then bypass the automatic 10+20% withholding. You will still be liable for $$t at the end of the tax year uuless you reload the IRA.

 

[kranky]

The 20% they take from your check is treated just like the federal taxes withheld from your paycheck. When you do your taxes, you count the 20% as withholding.

 

[FeathersMcGraw]

Originally posted by: Viper GTS

I'm 21, BTW, if that changes your advice any.

All the more reason to roll it over instead of cashing out. Early contribution to a retirement fund is a far more effective means of saving for retirement than increased payments later due to the power of compounding.