I rolled over a 401k moving jobs a few months ago. I am now thinking that the 30k in that account could really help pay down the debt both my wife and I piled up through college. With out the weight of credit card payments we could really save alot. Now the account never made any money infact its lost some and we have made no other contributions other then the initial roll over. Other then the 10% penalty which I am willing to take, what other fees or taxes do I need to worry about?
Youre right its just a roll over IRA
William
{ 4 comments… read them below or add one }
Alma
not only is there the 10% penalty but it will be taxed as income. The reality is now you are at about 50%
Frank
You’ll pay your highest marginal tax rate plus a 10% penalty. Besides getting yourself into your debt problem in the first place this will the worst financial decision in your life. You say you’ve lost money in the 401K and IRA which means you’re selling at a bottom compounding this terrible decision. Hope you have a happy retirement as you’re about to steal from it as we speak. Better that you control your spending habits than to steal from your retirement.
Jean
Are you sure it’s a ROTH IRA?
You would have to have rolled the 401K to an IRA, then to a Roth and paid income tax at that time (you only pay the income tax once).
If it hasn’t been 5 years, you would owe the 10% penalty. If the ROTH has had no earnings, there is nothing else to tax. (If it’s your last Roth IRA, you could take the loss as a pith deduction on your schedule A.)
Micheal
While it might be a bad decision in the long run and will owe the penaly, I disagree wth the first 2 answers that you will owe income tax on the withdrawal.
The difference b/n a traditional IRA and a Roth is that in the former, you don’t pay income tax when you save it and do pay tax when you withdraw. With the Roth, you’ve already paid income tax on it so you do not owe when you withdraw.
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