How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask R. Klein, EA Your Own Question
R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
63817126
Type Your Tax Question Here...
R. Klein, EA is online now
A new question is answered every 9 seconds

I have just turned 59 1/2 and I am planning to take a 24000.00

This answer was rated:

I have just turned 59 1/2 and I am planning to take a 24000.00 distribution from my 401k account to pay off a personal loan at 12% apr. I understand that 20% will be taken out for taxes. My income will then put me into the 25% tax bracket. Will I just have to pay 5% on the remaining amount of the distribution and 25% on my regular income which is normally taxed at 15%

R. Klein, EA :

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.

R. Klein, EA :

Thank you for your tax question.

R. Klein, EA :

No it is not that simple. Your withholdings in this case are a flat 20%

R. Klein, EA :

But if you are entering the 25% tax bracket, your real effective tax rate is not likely 25% but some slightly lower number.

R. Klein, EA :

Generally speaking, what you are proposing is not a good financial move.

R. Klein, EA :

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.

R. Klein, EA :

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.

R. Klein, EA and other Tax Specialists are ready to help you