Calculating the penalties of an early withdrawal from a 401(k) is done using the amount a person wants to withdraw, federal income tax rate, state income tax rate, age of retirement, number of years before retirement, which applies to people who have not retired, and the expected rate of return. A person can also opt to use online applications that help in determining the penalties.Know More
As of January 2015, the government charges 10 percent on any withdrawal made from 401(k) before a person gets to 59 1/2 years of age. However, if a person is using the money to solve hardships, buy a first home or meet higher education expenses, he or she may get a waiver of that penalty. It is important to note that the IRS does not consider being broke as a hardship. A person also needs to know his or her minimum distribution.
The IRS provides 12 exceptions that allow a person to avoid the penalty. A person is only required by law to start withdrawing from 401(k) account once he or she is 70 1/2 years old. If an individual is still working at 70 1/2 years of age, he or she can postpone withdrawals until April 1 of the following year.Learn more about Investing
An individual retirement account (IRA) is not commonly considered a liquid asset as there are penalties and taxes involved with converting the investment account into cash. A liquid asset is defined as something of worth that can be converted into cash quickly; bank accounts, bonds, mutual funds, stocks, exchange traded funds, certificates of deposits and cash fall into this category, as noted by the Federal Reserves.Full Answer >
Account holders calculate taxes and penalties for early withdrawals from traditional IRA accounts by adding standard income tax plus a 10 percent penalty tax for the amount of the withdrawal, reports the IRS. The 10 percent penalty tax is waived if the withdrawal qualifies as an exception.Full Answer >
Withdrawals from an IRA can be made at any time, but individuals under the age of 59 1/2 incur a 10 percent early withdrawal penalty, according to CNN Money. Individuals over the age of 59 1/2 can withdraw from an IRA without penalty but owe income tax on the funds.Full Answer >
Individuals should consider a number of factors when choosing a retirement location, such as the state tax rate, crime statistics and the cost of living. Future retirees must determine what characteristics matter most to them and research various states to determine which location best fits their needs.Full Answer >