Early Withdrawal

Archive for August, 2005

Question: IRA deposit for tax savings with purchase of house coming up?

I just did my taxes and my maximum IRA contribution of $4,000 adds $600 onto my federal return.

Answer: No, you wouldn’t just pay the penalty, you’d also pay tax at ordinary income rates – IRA withdrawals don’t qualify for capital gains rates.

You could deposit money now and get deductions for 2006 and 2007, not for 2008 – you can just make contributions for the current year, or for the previous year up until the filing deadline. Then you could take the money out without penalty, but would still pay tax at ordinary income rates when you file your 2007 return, so any savings on the contribution for 2007 would be a wash since you’d owe 2007 taxes on the withdrawal – you’d deduct $600 for an IRA contribution but add $600 for Ira Withdrawal. For the 2006 contribution, you would save a little since you’d essentially defer taxes on that amount for a year, but your savings would only be any gain on the $600 you took off of this year’s tax return, so would probably only be a few dollars.

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Question: 401k Early Withdrawal?

I’ve decided after going from 30k to 20k over the past year even while contributing, i am going to withdrawal completely from the 401k program. Not rolling over, and not filing hardship. Just withdrawaling. How much of a penalty can i expect to pay? Thank you!

Answer: 10% Early Withdrawal fee plus ordinary income tax.

401(k) Questions & Hardship Withdrawal Video | Bills.com

Question: If I withdraw contributions from my Roth IRA can I repay the withdrawal amount in a lump sum?

I understand that I can withdraw any contributions to a Roth IRA at any time for any reason without penalty. If I withdraw say $30,000 of prior contributions, can I put that money back in all at once at a later time, or must I abide by the annual contribution limits?

Answer: Your time limit to put the withdrawl back in would be 60 days from the time you received the distribution (call it a rollover). There is no rule that prevents you from changing your mind and redepositing a rollover back into the account you took it out of. But after 60 days you would be limited to annual contribution limits.

What can I do with a small amount of money in a Self Directed IRA?