Have a Tax Question? Ask a Tax Expert
Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.
Thank you for your tax question.
No it is not that simple. Your withholdings in this case are a flat 20%
But if you are entering the 25% tax bracket, your real effective tax rate is not likely 25% but some slightly lower number.
Generally speaking, what you are proposing is not a good financial move.
You are throwing away not just $5000 of your retirement money, but you are also foregoing the future growth potential of that money AND the rest of the money you withdraw.
A 12% debt is not that great of a hurdle, although you may think it is. If you are already retired, then it is a fair hurdle to try pay down as quickly as possible, but I don't think taking money out of the retirement plan is where I would start.