I am struggling to understand the process of closing one of my 401ks. I have a few and am looking to pay off of student loans from nursing school.
I understand there's a 10% penalty for early withdrawal and planned on taking out another 20% to pay the feds (so 30% withheld total). How much extra should I withhold to cover state taxes?
Married and barely above the 35% income tax threshold. I absolutely, positively do NOT want to owe in state or federal taxes at the end of the year.
This particular 401k is only 58k, so I'd remain in the 35% income tax threshold since it acts as income.
Please help!
Withdrawing from 401k Early (State of Wi)
byu/sweet_red_cherries inpersonalfinance
Posted by sweet_red_cherries
3 Comments
Don’t do it. It’s only worth cashing out a 401k to prevent homelessness.
It’s taxed as ordinary income so just add the total withdrawn to your taxable ordinary income for the year and do the math for state taxes on that.
Depends on the state you’re in. My state, the tax on regular income (which the 401k distribution is) is 5%