What’s the IRS penalty for cashing in a retirement account?
It’s a 401(a) that my employer automatically contributed to. I didn’t even know I had it until I left the job and there is very little in it …not worth transferring to an IRA so what percent will the IRS take if I withdraw it?
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Comments (6)
Mine was 20%
It’s fully taxable as ordinary income, plus an additional 10% penalty tax if you are under age 58 1/2 at the time of the distribution. So, if you’re in a 15% tax bracket, it will cost you 25% of the distro to cash it out.
10% penalty PLUS income tax at the same % as your other income. For example, if your other income is taxed at 25%, then for each $1000 that you withdraw, there would be $250 tax plus $100 penalty for a total of $350 (35% in this example).
SEVERE penalties. Transfer to an IRA, and add something to it for your future and a tax deduction next year.
10% penalty for early withdrawal and tax at your normal rate, so that’s 25-50% you lose. Don’t do it!
Income tax at whatever your bracket is will be due. If you are under age 59-1/2, there will be a 10% penalty on the amount withdrawn.
It would help to know the amount in the account and your income amount. But Id just roll it to an IRA anyway, by the time you pay the penalty, and tax, it takes a big chunk of the amount.