Taxes on 401(k)withdrawl

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Rick C
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Taxes on 401(k)withdrawl

Post by Rick C » Sat Dec 16, 2017 2:37 pm

If I withdraw $7000.00 dollars a month from my 401 account and withhold at a single with 0 dependents rate how much will I actually receive per month? Thanks.

invst65
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Re: Taxes on 401(k)withdrawl

Post by invst65 » Sat Dec 16, 2017 3:45 pm

Can we assume you are at least 59 1/2 years old? If not, you can start by reducing the amount by $700/month to pay the 10% penalty.

Beside that, I don't think anybody can answer your question because there is not enough information. Would need to know what other income you have as that will determine your tax bracket.

I'm one year away from having to start withdrawals from my own IRA so I haven't been through this yet so somebody can correct me if I'm wrong. I don't think your withdrawals are going to be taxed on a W4-basis the way you are describing. I think you have to figure out the percentage to withhold yourself based on your total income. In that case you would just figure it out using any number of online programs to calculate what the total tax would be for the year and divide by 12.

livesoft
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Re: Taxes on 401(k)withdrawl

Post by livesoft » Sat Dec 16, 2017 3:48 pm

I think the OP is asking not what the actual tax will be, but what the withholding per Publication 15 will be given a W-4 filed with his 401(k) provider. He is assuming that it works like withholding of taxes from a paycheck.
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Rick C
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Re: Taxes on 401(k)withdrawl

Post by Rick C » Sat Dec 16, 2017 4:02 pm

Thanks for the response. I guess that I’m asking just what the tax is on $7000.00 if the rate I withhold is single and 0 dependents.What will I receive after taxes on that amount?

retiredjg
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Re: Taxes on 401(k)withdrawl

Post by retiredjg » Sat Dec 16, 2017 4:23 pm

Does it actually work that way with a 401k?

When I withdraw from my IRA, I get to choose a percentage to withhold. That is pretty easy. Hard to imagine withholding being based any other way.

JW-Retired
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Re: Taxes on 401(k)withdrawl

Post by JW-Retired » Sat Dec 16, 2017 4:24 pm

Rick C.,
If you are asking what the tax will be: Assuming the $7000/month was your total income, and you were 60 years old so you could withdraw it without penalty, and no medicare taking a cut, federal tax only......... my favorite tax calculator says for filing single & std deduction you would net after tax $5822/month. (At current tax brackets.)

That wouldn't happen automatically unless you put the right numbers into your 401k withholding form. Maybe as easy as set it to withhold $1178 from each check?
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invst65
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Re: Taxes on 401(k)withdrawl

Post by invst65 » Sat Dec 16, 2017 4:28 pm

Here is just one of the free tax calculators you can use to figure it out....

https://www.hrblock.com/tax-calculator/#/en/te/aboutYou

Just input your information and it will tell you what your tax will be, at least in 2017. So divide by 12 and subtract from 7000 - that's assuming you intend to pay your total tax bill from withholding on your payments.

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FiveK
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Re: Taxes on 401(k)withdrawl

Post by FiveK » Sat Dec 16, 2017 4:47 pm

Rick C wrote:
Sat Dec 16, 2017 4:02 pm
Thanks for the response. I guess that I’m asking just what the tax is on $7000.00 if the rate I withhold is single and 0 dependents.What will I receive after taxes on that amount?
Federal withholding, according to the percentage method given in Publication 15 (2017), (Circular E), Employer's Tax Guide, would be $435.45 plus 25% of ($7000 - $3,354) = $1346.95.

$7000 - $1346.95 = $5653.05.

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Watty
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Re: Taxes on 401(k)withdrawl

Post by Watty » Sat Dec 16, 2017 5:13 pm

Your state taxes and they way that Social Security is taxes will be important to include in your calculations.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

https://www.bogleheads.org/wiki/Social_ ... calculator

If there are any changes to tax in the near or distant future would also change it.

pshonore
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Re: Taxes on 401(k)withdrawl

Post by pshonore » Sat Dec 16, 2017 5:49 pm

FiveK wrote:
Sat Dec 16, 2017 4:47 pm
Rick C wrote:
Sat Dec 16, 2017 4:02 pm
Thanks for the response. I guess that I’m asking just what the tax is on $7000.00 if the rate I withhold is single and 0 dependents.What will I receive after taxes on that amount?
Federal withholding, according to the percentage method given in Publication 15 (2017), (Circular E), Employer's Tax Guide, would be $435.45 plus 25% of ($7000 - $3,354) = $1346.95.

$7000 - $1346.95 = $5653.05.
Withholding for periodic payments like pensions, etc might be different. Heres what Pub 15-A says
Periodic payments are those made in installments at regular intervals over a period of more than 1 year. They may be paid annually, quarterly, monthly, etc. Withholding from periodic payments of a pension or annuity is figured in the same manner as withholding from wages.

If the recipient wants income tax withheld, he or she must designate the number of withholding allowances on Form W-4P, line 2, and can designate an additional amount to be withheld on line 3. If the recipient doesn't want any federal income tax withheld from his or her periodic payments, he or she can check the box on Form W-4P, line 1, and submit the form to you. If the recipient doesn't submit Form W-4P, you must withhold on periodic payments as if the recipient were married claiming three withholding allowances. Generally, this means that tax will be withheld if the pension or annuity is at least $1,720 a month.
Then we have the CT Legislature which passed a law that starting on 1/1/18, all pensions (both public and private) , annuities etc, must have mandatory withholding for State tax purposes. Failure of the individual to file W4P with the payor, will result in a flat 6.99% being withheld. Most CT folks pay substantially less.

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FiveK
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Re: Taxes on 401(k)withdrawl

Post by FiveK » Sat Dec 16, 2017 11:29 pm

pshonore wrote:
Sat Dec 16, 2017 5:49 pm
Withholding for periodic payments like pensions, etc might be different.
Yes, defaults may differ.

In the OP's case, with a specification of single and 0 allowances, as Pub 15-A says
Withholding from periodic payments of a pension or annuity is figured in the same manner as withholding from wages.

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Padlin
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Re: Taxes on 401(k)withdrawl

Post by Padlin » Sun Dec 17, 2017 5:55 am

I live in MA and I'm over 60. Fidelity takes out 20% federal and 5% state no matter what I claim or how much I ask for. Don't know if it's a Fidelity or a News Corp policy. Your circumstances will differ.
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Earl Lemongrab
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Re: Taxes on 401(k)withdrawl

Post by Earl Lemongrab » Mon Dec 18, 2017 2:33 am

The fact that the OP is making the same withdrawal each month doesn't make it a periodic distribution. That's something that has to be set up specifically that way (SEPP). If it's just individual withdrawals, then a 20% withholding is mandated for Federal taxes.
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