Early Withdrawal

Posts Tagged ‘401k’

Question: Early Withdrawal from IRA for first home, BUT for finishing the home?

This is my first home, got mortgage approx. 6mos. to 1 year ago (I should know that!), and I still have things that need to be finished. I understand you can withdrawal early from your IRA for a first home – $10,000, but does that have to go right to the mortgage company or can I finish the house with the money? It would all be spent on the house, just not directly on the financing. Its just taking me longer than I thought to finish this darn thing – the kitchen, appliances, etc.!
And think of this Mr. IRS man, all that money would help the economy! Home depot, sears, lowes… lol

Answer: IRS has no way to track exactly where the money is spent. BUT you have to buy a home in the year you take the withdrawal. Bottom line, if you bought a home in 07 you can’t take a tax and penalty free distribution in 08. If your IRA is of the Roth style, then you can take back your principal without tax or penalty.

Question: Was any Ira Withdrawal relief passed this year ?

The candidates talked of allowing limited IRA withdrawals to be taxed at 10 %. Did that or anything like it actually become law ?

Answer: No.

As of now, there are no changes to previous law.

Rapid City Tax Day Tea Party – Ira Taken Alive

Question: How do you make early withdrawals from a 401k? What are the penalties?

I’m unemployed and I think I may need to dip into my 401k for money. How do I go about withdrawing the money and what kind of penalties are there?

Answer: You contact your plan administrator (phone no. on your quarterly statement).

Any money you withdraw will be taxed as ordinary income at your rate (15%, 28%, etc., but adding the 401k money may push you into a higher tax bracket), plus a 10% penalty if you are under 59-1/2. The plan administrator will withhold 20% for taxes on any money you pull out.

There are no special exceptions for people who need the money because they’re unemployed. You can set up a plan to withdraw money in equal monthly installments for either 5 years or till your age 59-1/2, whichever is shorter Ask the plan administrator.

Good luck, because it’s tough these days.

Personal Finance: 401(k) : Accessing 401(k) Contributions in an Emergency