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Cashing out a 401k?

My husband cashed out his 401k. Against my wishes, but whatever. They took the 10% penalty and some sort of 20% tax fee. What else am I gonna have to pay in reprocussions from this? I assume there are more taxes... And I assume there will be payments required on April 15th... Anyone know?


Asked by emhain at 7:59 AM on Jun. 26, 2008 in Money & Work

Level 10 (478 Credits)
This question is closed.
Answers (4)
  • It is safe to assume that their will still be taxes due come 4/15. However its not always the case. It depends on the size of the cashout, what tax bracket it puts you in, dependents, any write offs and credits, if you can itemize. I cashed out a $7500 IRA in 2006. On our 2007 taxes it did put us into the next tax bracket but our 3 kids and child care expenses took care of the additional liability. If your super worried he can arrange to have extra taxes taken out of his paycheck. He needs to go to his boss or payroll manager and ask that they do it. He can set if its 10, 20, or 50 bucks a payperiod that they hold and send in. That can help alleviate any extra liability. If it doesn't put you in the next bracket and he did have extra held, he will get it back in a refund.
    BTW I am an accountant :)

    Answer by SensualScents at 11:25 AM on Jun. 26, 2008

  • Yes, there will be more will have to also claim that amount as income on your 2008 taxes and it will push you up into a higher tax bracket. I'm sure you already realize this, but you should never cash out your 401k!

    Answer by slw123 at 8:21 AM on Jun. 26, 2008

  • We've cashed out our a few years have to claim it as income on your taxes and depending on your income it may or may not push you up into the next tax bracket. It also again, based on your current income, may or may not effect what other credit you get say for children etc. We saved an extra 10% and but it aside in a cookie jar to help with any thing we would have to pay as a result of cashing the 401k.

    For us, because of our income at the time, it really didn't "hurt" us when it came to taxes, but then again if my hubby made more money it would have.

    Just remember to clam it as income and go from there....

    Answer by SAHMinIL at 8:42 AM on Jun. 26, 2008

  • Cash Out 401k
    Cash Out 401k Think twice before you do it. A cash out 401k can cost you a lot of money now, and a lot of money down the road. If you are leaving a job and ... -

    Answer by vbruno at 11:15 AM on Jun. 26, 2008