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The Water Cooler
General Discussion
New job, rollover vs cashing out?
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<blockquote data-quote="DPI" data-source="post: 1474355" data-attributes="member: 793"><p>Lets do some math on cashing out. I believe this is the way the IRS would handle your early withdrawal.</p><p></p><p>$14,442 Cash value of 401K</p><p>$ 3,822 Loan value that must be repaid with after tax and early withdrawal penalty dollars</p><p><u>$18,264</u> Total taxable and penalty value of 401K</p><p></p><p></p><p>$14,442 Cash value</p><p><u>($1,826)</u> -10% early withdrawal tax penalty on $18,264</p><p></p><p>$12,616</p><p><u>($7,306)</u> -40% (minimum) of the $18,264 tax withholding for federal and state taxes. Could be closer to 50%</p><p>$5,310 </p><p><u>($3,822)</u> pay back the loan with after tax dollars taken above.</p><p>$1,488</p><p></p><p></p><p></p><p>Net cash you will end with should be around $1,488. However, when you file your 2011 taxes, you could recoup some of the overpayment of taxes if your marginal tax rate is lower.</p><p></p><p>I would definitely get a written estimate from your HR/401k provider before you make the decision to cash out.</p></blockquote><p></p>
[QUOTE="DPI, post: 1474355, member: 793"] Lets do some math on cashing out. I believe this is the way the IRS would handle your early withdrawal. $14,442 Cash value of 401K $ 3,822 Loan value that must be repaid with after tax and early withdrawal penalty dollars [U]$18,264[/U] Total taxable and penalty value of 401K $14,442 Cash value [U]($1,826)[/U] -10% early withdrawal tax penalty on $18,264 $12,616 [U]($7,306)[/U] -40% (minimum) of the $18,264 tax withholding for federal and state taxes. Could be closer to 50% $5,310 [U]($3,822)[/U] pay back the loan with after tax dollars taken above. $1,488 Net cash you will end with should be around $1,488. However, when you file your 2011 taxes, you could recoup some of the overpayment of taxes if your marginal tax rate is lower. I would definitely get a written estimate from your HR/401k provider before you make the decision to cash out. [/QUOTE]
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