shiprepairwoman
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You will be hit with the full tax and penalty. |
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dldouc
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About the only exemption from this penalty is if you had a lot of medical bills. The amount of medical bills over 7.5% of the AGI can be deducted from the amount which would lower your 10% penalty. Check out the site below, maybe something else will apply. |
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financialpeas
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With taxes at 28% and a 10% penalty, for example, you paid 38% of the money in your 401K to pay of your house and land, that was financed at what interest rate? A lot less than 38% I bet. If you can repay your 401K, you should. That was not a wise decision at all.
Others... NEVER EVER borrow or take money from your IRA or 401K to pay off debt or buy something unless it lets your avoid foreclosure or bankruptcy. Never. |
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digdowndeepnseattle
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If hubby was over age 55 at the time of the merger, you MAY be able to avoid the 10% penalty. That's about the only way. Though worse than that...you got rid of your house payment which reduced your interest deduction which might have put you in a worse position. One thing to keep in mind is that this is a short term situation. Yes it was a mistake, and admittedly a big one, but if it makes you sleep better at night I can't argue with that. Only thing I'd recommend is that you immediately (yesterday) start maximizing hubby's 401k, your 401k and both of your IRA's. You need to get $$ into your retirement. |
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bostonianinmo
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Paying those things off with a 401(k) is probalby the worst financial decision you could make. The total tax bite on that money is far greater than the interest you would normally have paid when compared to the lost tax-deferred growth of the funds had you left them in the 401(k). However, what's done is done; there's no way to "Unring the Bell" and undo what you've done.
There's no way to reduce the tax hit either. You don't get a "deduction" for paying loans off early. The entire distribution is subject to income tax as ordinary income, plus the 10% penalty if you're under age 59 1/2.
Your only chance to avoid any tax on it was to roll over the proceeds within 60 days of the distribution. You chose to not do that and are now paying the price. |
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travelguruette
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Unfortunately you cannot avoid the tax hit. You eliminated your big tax interest deduction for the years to come by paying off the house. Now most likely you will no longer be able to itemize. Make sure enough taxes are taken from your future paychecks to pay your taxes. You should have rolled it over then taken a loan against the 401k to pay the bills. At least then you pay the nondeductible interest to yourself. |
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AnnieG
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NOOO.. that is a big one. You will be hit with the penalty of course but that is just for starters! |
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CHIEFONE
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Find a way to borrow the money to fund a 401k account for the amount you withdrew or you're going to pay an additional 28% on the money. There may also be a time period you have to reinvest the money in a qualified plan (60 days, I believe). The smartest thing you could do now is to call your accountant or consult with a financial planner to try to undo the damage and lessen your tax hit.
CHIEFONE |
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southside
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I dont think so. All the taxes he didnt pay when it was getting deducted from his checks will have to paid at the end of the year. That is why when you retire you dont take it out as a lump sum. I am thinking that was not the smartest thing to do. I could be wrong though my wife is the CPA. |
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waulterss
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Don't think so, only health care expenses or other investments of the $$$$$$ |
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stevexnelson
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None of this is deductible.
It will be taxed as ordinary income. Also, you will have to pay a 10% penalty.
Good luck. |
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