401K set up advice

[retiredTxfeeder]

My wife has a 401k where she works and they are more liberal about letting you get ahold of money if you need some before retirement. She can borrow money for any reason and she just pays herself back. money in the 401k is pretax, so you will pay taxes on it. If you withdraw before age 59.5, you will also incur a 10% penalty on top of the 20% withholding, as far as I know.

 

[Brownslave688]

My wife has a 401k where she works and they are more liberal about letting you get ahold of money if you need some before retirement. She can borrow money for any reason and she just pays herself back. money in the 401k is pretax, so you will pay taxes on it. If you withdraw before age 59.5, you will also incur a 10% penalty on top of the 20% withholding, as far as I know.

Most of my money is in our Roth 401k. That money is post tax.

 

[oldngray]

Roth is better if you are looking at a longer time frame but not as good if you are closer to retirement.

 

[Brownslave688]

I could be wrong but I think you can pull Roth out at anytime also without penalty. Since you already paid taxes on it.

 

[upschuck]

I could be wrong but I think you can pull Roth out at anytime also without penalty. Since you already paid taxes on it.

I believe up to the amount you put in. You can't withdraw any gains until of age

 

[UpstateNYUPSer(Ret)]

I could be wrong but I think you can pull Roth out at anytime also without penalty. Since you already paid taxes on it.

You can take any of the principal out at any time for any reason.

 

[Dutch Dawg]

... If you withdraw before age 59.5, you will also incur a 10% penalty on top of the 20% withholding, as far as I know.

I suspect the 10% hardship withdrawal penalty can be avoided if one is at least age 50 and terminates employment in the same calendar year from which the 401k is tied. I do know if one searches the web, example for other circumstance is given citing 5 year equal distribution formula to be used as income up to age 59.5. Then again I'm just a dumb ole truck driver, so don't take this as the word.

 

[UpstateNYUPSer(Ret)]

The Rule of 72 applies if you separate or retire before 59 1/2. I don't know if it applies if you are terminated.


Resident know-it-all.

 

[retiredTxfeeder]

I assumed continued employment, no separation or termination, and yes, there are a couple of instances where you can withdraw money before 59.5, but I didn't list everything in my post. The ups/teamster 401k rules are pretty strict about withdrawal early. My wife, on the other hand, can borrow money from hers anytime she wants, for any reason. She works for a large fortune 500 company as well.

 

[Xexys]

I suspect the 10% hardship withdrawal penalty can be avoided if one is at least age 50 and terminates employment in the same calendar year from which the 401k is tied. I do know if one searches the web, example for other circumstance is given citing 5 year equal distribution formula to be used as income up to age 59.5. Then again I'm just a dumb ole truck driver, so don't take this as the word.

I took money out of my 401k last year (almost 20k). I didn't get any penalty at all and at the time I was 57 years old.

I believe it depends on how UPS codes it on your W-2 as my wife who is an accountant noticed it on our W-2 that it was coded differently than it should have been for us to get the penalty. Lucky me...

 

[UpstateNYUPSer(Ret)]

As an accountant, your wife should know that distributions from a 401k are reported on a 1099-R, not on your W-2.

Are you sure that the figure on your W-2 was not for the contributions you had made that year?

 

[Xexys]

Yes I misspoke, it was the 1099-R. Doesn't really matter though does it? The premise of the post is that I wasn't taxed the extra 10%. You always have to get your nails into every post don't ya? And now you're even attacking my wife! It wasn't her mistake, it was mine as I didn't look carefully enough without my glasses to see what form she was showing me. Go get a girl.

I've been on these forums long enough for you to know that I could not have had any 401k contributions as I've been retired now for 3 and 1/2 years. Last contributions would've been on my 2012 tax returns. I took the money out in 2013 when I had no contributions made at all. So yes, I'm quite sure of that. My memory is not as good as it once was but this time I have paper to back me up.

 

[UpstateNYUPSer(Ret)]

I thought I was fairly restrained in my response.


Resident know-it-all.