I don't have a current 401k.  I just want the money.  How much will the disbursement be taxed?

I've received a letter in the mail  stating they will transfer  my stock shares from the Employee Stock Ownership Plan to a 401K account. I will then have an option to invest in other funds available within the plan, roll over the balance to another qualified retirement account, or take a disbursement. I am currently 54 years old, disabled and not working. I could use the almost $13,000 now, but I know a good chunk of it will be taken for taxes. Should I let it sit?

8 Answers

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  • Eva
    Lv 7
    1 month ago
    Favorite Answer

    Disability is an exception to the 10% penalty, but you would still have to pay income tax on it. The rate would depend on what the rest of your income is.

  • 4 weeks ago

    You will want to do some reading on this.  I think you can access without the penalty, but you might also impact your Disability payments. Do you have a consultant at SSA you work with regarding your Disability payments?  I would confirm with them. 

  • B
    Lv 7
    4 weeks ago

    let it go to the 401k and consider taking it out after you are 59 1/2. the penalty is 10% ($1300) and the full $13,000 gets added to your taxable income in 2019 if you get it now in 2019.

  • 4 weeks ago

    'I could use' is not 'I need'. You should let the money go into the 401K, or if you have your own traditional IRA, roll the funds into that. Keep letting that money working for at least until you are 59 1/2. You will avoid the 10% tax penalty for early withdrawal.

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  • 4 weeks ago

    Is this stock that you own outright through the plan?  If so, you already paid for it, and any bonus element was already taxed in your paychecks.  The only tax would be on capital gains, and if your income isn't too high, that $13,000 would be taxed at 0% in the USA.  State tax might take something out, but not much.

    It also sounds like you have the option of NOT rolling it to the 401k, and just taking the money now.  If so, then no worries about penalties.  If you need the money, you need it, but if it were me, I'd do everything I could to just put the money into either a Roth 401k at the workplace, or if that's not possible, then a Roth IRA of my own.  In 5 years, at age 59 1/2, you can draw money out with neither tax nor penalty if you need to.

  • 1 month ago

    If you are not working, then you are likely going to be taxed at rock bottom anyway, so you might as well take it out now - IF you need it.

  • Judy
    Lv 7
    1 month ago

    Whatever your tax rate is plus a 10% penalty . Let it sit if you can.

  • 1 month ago

    roll balance over into a qualified IRA account. If you want the money, you'll receive a penalty.

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