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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29657
Experience:  Taxes, Immigration, Labor Relations
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We have $261000 in 401k it is not pte taxed. We may be laid

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We have $261000 in 401k it is not pte taxed. We may be laid off in next couple of months. If we are lucky we may get 6 months severance pay. My husband is in the oil service Co. This is all our savings except for about $4000 . He is 56 so it will be very hard for him to find job. He is making 112000 a year. he also worked his way up in company with only a Ged . We sold our last home in mississippi. Did not lose money but did not make a lot. We are now renting. Will probably go back to rural Il . Will have to use 401 k money to buy some type of modular home. as inexpensive as possible. How much trouble are we in
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

First of all - the money in your 401k account - are your money and you may use them as you wish.

Several issues, however...

Assuming that is your husband's account and he is below 59 1/2 - there will be additional 10% early distribution penalty .

In additional - the distributed amount will be added to your total taxable income and will likely push you into higher tax bracket.

State taxes will be extra.


If you plan a distribution - it is better to avoid large distribution in any single year.

As you are likely in 25% tax bracket - additional tax liability because of distribution would be estimated as

25% (income tax) + 10% (penalty) + 3% (IL tax) = total 38% of distributed amount.


Let me know if you need any help.


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