Thinking Of Withdrawing From My 401k.

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Originally Posted by Zybrainn

You're making a poor assumption in that there will be no income taxes if a person is 59.5 and withdrawals from 401k. I don't care to look up what that rate is, but i know it is not 0%.

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No, he said you pay a 10% penalty if under 59.5. Older than that and there is no penalty, you just pay regular income taxes. At his age he pays both which would be anywhere from 25% on up. If his state has income taxes he pays those too.

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Originally Posted by Jimvr4

No, he said you pay a 10% penalty if under 59.5. Older than that and there is no penalty, you just pay regular income taxes. At his age he pays both which would be anywhere from 25% on up. If his state has income taxes he pays those too.

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He mentioned that if your credit card interest is lower than 25% (10% penalty + 15% to 20% income tax rate), then he shouldn't pull any money out of 401k. This is making the assumption that there would be no income taxes charged at 59.5, which is not correct.

Most people assume their income will be lower at that age so you'd probably fall in a lower tax bracket. My off the cuff math tells me he should really consider pulling money out of 401k if his credit card interest rate is somewhere between 15-20% (10% penalty + 5-10% lower income tax rate at 59.5)