Tax consequences of liquidating a 401k pregnancy dating based on conception

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Then, since your 401(k) contribution was made tax free, you now have to pay federal income tax on this withdrawal.For instance, in 2017 if you're single and your taxable income is ,000, your marginal tax rate is 25%.You can't withdraw these funds because your employer contributed the money for the sole purpose of your retirement.One exception: You may be able to withdraw money for early retirement in such cases as a layoff.Granted, if you didn't deposit the money into your 401(k), you would have had to pay tax on it anyway.But you wouldn't have faced a one-year period where you'd have to pay the taxes all at once, and you likely wouldn't have had to pay the higher tax rate on it.With numbers that high, it's tempting to withdraw 401(k) plan funds that seem to be sitting around collecting dust until retirement.Then there are other reasons that make retirement savings seem the solution, such as finding yourself deep in debt from credit cards or an emergency, such as a sudden illness.

A few years later your credit cards have rebuilt themselves, and you think again about your 401(k) money just sitting there. A year later, you take out money for a home down payment.In most cases, you can only withdraw elective-deferral contributions, the deposits you made beyond what your employer deposited into your 401(k) plan.All of the money your employer deposited into your account is ineligible for distribution for debt repayment, says IRS representative Clay Sanford.However, you are also ,000 short in your retirement account from what you had before.The caveat is that it's a one-time occurrence, and you have a savings plan in place to repay the money plus interest earned.

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