AboutDavid M Iannopollo Expertise I am a professional financial advisor who can assist you with answers on mutual funds, annuities, IRA's, rollovers, qualified and non-qualified retirement plans, retirement planning, educational planning, life, disability and LTC insurances.
Experience I have over 20 years experience in the business and financial world.
Question David, Thank you for your time. My question is about my 401k.The company that i work for is letting go of our dept. I have about 10,000.00 in my 401k. I am looking for another job but till i find one i need the money to help till things get better. I heard that if i withdraw the money i will lose 40% right of the top. Do you know somewhere i can roll over my money and borrow as needed without losing a big chunk. Hope you can help me . Thank You, Ruben.
Answer Hi Ruben,
Sorry to hear of your job situation. If you withdraw money from your 401k, the company holding your funds will withhold 20% for federal taxes. You will owe more or less at tax time depending on your tax bracket. You will also be penalized 10% for early withdrawal if you are under age 59 1/2 plus you could owe state tax depending upon the state you live in. So 40% is not out of the question.
You can rollover these funds to an IRA invested in just about anything you like. If you take funds from the IRA they will not withhold 20%, but you will owe all taxes and penalty when you file your taxes.
You cannot "borrow" from the 401k (you no longer work there), and loans are not allowed from an IRA. If you think you may need the money for only a short period, you can take a withdrawal from the IRA and you have 60 days to replace the funds with no tax or penalty. This is the only way around the taxes and penalty as all transactions are reported to the IRS. I hope this helps. Good luck!
