According to a Bloomberg report, “Since the housing collapse of 2008…taking money from a 401(k)—and worrying about the consequences later—became a more attractive alternative and a record number of Americans made early withdrawals in 2010 following the financial crisis.” So before you proceed, consider all the fees and tax penalties which exist in the first place to discourage such actions.Here, we provide an overview of what penalties and tax consequences to expect.
As a result, the Internal Revenue Service (IRS) collected a staggering .7 billion from 401(k) early withdrawal penalties.
Taxable savings enjoy what is known as a step-up in basis when they are passed to a beneficiary.
Essentially that means your beneficiary potentially can sell an inherited asset soon after it is received and owe little or no income tax on it whatsoever.
Assuming you are past age 59 ½, you’ll avoid any early withdrawal penalty.
Required minimum distributions from tax-deferred accounts must begin at age 70 ½.
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So by the time you actually enter retirement, you may have both taxable and tax-deferred resources.