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My employer has changed our retirement plan and the old plan is being "closed out" so?
we have the choice of 1. rolling it over into the new plan; 2. rolling it over into some other type of 401K plan or 3. cashing it out. My question is this, if I cash it out (6500 total) then what would my penalty and taxes be. I file HOH w/2 dependents and make only $18,000 a yr. Does anyone know what the final figures would be.
P.S. I know I probably should not do this but I am in a great financial bind so I am not asking if I should do this, just what would it add up to if I do. Thanks to anyone who can answer.
sorry about that. It's a 403B plan. So if I cash it out I would have income for the yr of about 24,500? Is that right. Is the early withdraw penalty 10 or 20% plus normal taxes due.
2 Answers
- STEVEN FLv 71 decade agoFavorite Answer
Your options are:
1. Roll into the new plan.
2. Roll into an IRA. (a 401(k) is your employer's plan)
3. Cash out.
For ANY qualified retirement plan, which includes 401(k), 403(b), etc., you would pay a 10% penalty + regular taxes on the withdraw. The 20% amount is the statutory WITHHOLDING. It is NEVER the actual amount of tax owed.
- Uncle PennybagsLv 71 decade ago
What is the old plan? Is it a 401k? Then there will be normal income taxes + 10% penalty on the $6,500.
If it's a cashed out pension plan, I believe it's only normal income taxes. Remember, that's additional income at the top of your normal income, so even though you are at the low tax end now, there may be some taxes due.
UPDATE: Sorry, I don't know the answer for a 403b plan.
