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IRA Withdrawal Question

Hummingbird125Hummingbird125 member
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edited November 2013 in Not Engaged Yet
Hey all you smart ladies - I'm in need of some financial help!

I just found out a few months ago that apparently I had an employee-sponsored retirement plan with about $3500 in it, from my old job. I had seen this sum on some statements, but I (wrongly) assumed it was part of my 401k. Well, when I realized that it was separate from my 401k, I decided I wanted to withdraw it since I quit my full-time job back in July and could use the extra money to completely pay off my credit card debt, & take care of a few other expenses. Since I hadn't even known this money existed a few months ago - it's basically free cash!

I had to wait until the plan was converted to an IRA, which just finally happened on November 1st. Now I can make a withdrawal. The question is - how much do I elect to have withheld for taxes? I don't want to owe any taxes on this money at the end of the year. I know that the IRS charges a 10% early withdrawal penalty, so that of course will be withheld, but it also asks for how much I want to be withheld for state taxes - I can enter a dollar amount, or a percentage. What would you do?

CN: How much should I have withheld for taxes from my IRA withdrawal, if I don't want to owe taxes on it at the end of the year?
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Re: IRA Withdrawal Question

  • KateJ16KateJ16 member
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    I would talk to someone from the company that manages it and see what they recommend. I took my old plan from my old job and rolled it over into my new 401k, so it was all encompassing.  Then I borrowed from my 401k to pay down my debt - I love that I'm paying interest to myself and that it comes right out of my paycheck every month so I don't need to remember to do it.

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  • Hummingbird125Hummingbird125 member
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    thanks @misslittlenumberrobot and @KateJ16. Whenever I call the company with a question they always seem really confused, so I don't know how helpful they'll be, bu it might be worth a shot. I'll take a look at the IRS site too.
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  • KateJ16KateJ16 member
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    Have you talked to your current employers 401k manager?  That's who I ended up talking to - he was the one who recommended I combine them before borrowing.

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  • Hummingbird125Hummingbird125 member
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    KateJ16 said:
    Have you talked to your current employers 401k manager?  That's who I ended up talking to - he was the one who recommended I combine them before borrowing.
    I don't have a current employer - I quit my full-time job in July and am just working part-time now.
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  • KateJ16KateJ16 member
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    Ah - that's right.  Sorry - confused over here!!

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  • Peaseblossom55Peaseblossom55 mod
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    I agree with @misslittlenumberrobot talk to a tax person /cpa

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  • GoldenPenguinGoldenPenguin mod
    Moderator Seventh Anniversary 2500 Comments 500 Love Its
    Every time I see the title of this thread, all I see is "withdrawal" and I giggle.


    I'll be over here on my immature train. 



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  • cu97tigercu97tiger member
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    I'll play devil's advocate... are you SURE you want to do this? You are giving away $350 of this money, plus I believe if you wait until you're 62, you get the money tax free... so esentially you could be giving up half the money to save a couple hundred dollars in credit card interest.

    Only you really know your situation, so if you NEED it, then you NEED it. But if you don't need it, I'd let it stay put and earn interest for you!
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  • Hummingbird125Hummingbird125 member
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    @cu97tiger - Yeah I'm sure, when I quit my job back in July I told myself I would do everything possible to avoid withdrawing any bit of my 401k, and luckily I got a decent part-time job so I won't have to do that. This money (even if I only get half of it) will let me pay off my CC (the only debt I have left!) and will let me buy some needed supllies for my Etsy business. It probably doesn't totally make sense, but seeing my CC paid off and having a little extra in my savings account will give me a lot of peace of mind about my finances. Basically, I think $1500 will be more useful to me now than $3,000 will be to me in 35 years - but thanks for playing devil's advocate!

    & @brisox81 - Never get a job at a bank!
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  • cu97tigercu97tiger member
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    Hummingbird125 said:
    @cu97tiger - Yeah I'm sure, when I quit my job back in July I told myself I would do everything possible to avoid withdrawing any bit of my 401k, and luckily I got a decent part-time job so I won't have to do that. This money (even if I only get half of it) will let me pay off my CC (the only debt I have left!) and will let me buy some needed supllies for my Etsy business. It probably doesn't totally make sense, but seeing my CC paid off and having a little extra in my savings account will give me a lot of peace of mind about my finances. Basically, I think $1500 will be more useful to me now than $3,000 will be to me in 35 years - but thanks for playing devil's advocate!

    & @brisox81 - Never get a job at a bank!
    Well, at 2% interest compounded monthly, it would be about $6400... but I hear what you're saying :)
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