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bayou choupique
LSU Fan
the banks of bayou choupique
Member since Oct 2014
1146 posts

taxes on early withdrawal IRA
My wife and I are currently building a house. Prior to construction we agreed she could cash out one of her IRA's for some finishes she wanted extra in the house. She cashed it out last week and had no taxes withheld. I am aware of the 10% early withdrawal penalty, but how much should we plan to put aside for taxes? last year we were in the 22% bracket.


castorinho
Oklahoma Fan
13623 posts
Member since Nov 2010
58308 posts

re: taxes on early withdrawal IRA
Sounds like you already know it wasn't a smart decision, so we'll just ignore that.

10%+whatever your marginal tax rate is going to be when you add this distribution. Could be 22%, could be 24% depending on how close you were to that last year and how much this distribution is.
And that's if all else is equal from last year.


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70
TorchtheFlyingTiger
North Carolina St. Fan
FL
Member since Jan 2008
572 posts

re: taxes on early withdrawal IRA
Let's not just ignore that this is a bad idea. You're making somewhere above $100k annually and can't budget for finishing touches without tapping retirement and essentially paying a 30%+ premium on those items and losing years of growth. Find the cash somewhere else. If you're really cutting it that close you need to be prepared for other unforseen costs to pop up and those finishing touches may just need to be put on hold until you can actually afford them.

60 day redeposit rule is your friend. You can still undo this mistake.


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131
Fat Bastard
Boston College Fan
Member since Mar 2009
40307 posts

re: taxes on early withdrawal IRA


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Weekend Warrior79
LSU Fan
River Ridge
Member since Aug 2014
3139 posts

re: taxes on early withdrawal IRA
Agree with the other posts, but if you are set on taking it out. I would simply plug the figures into last year's return and see how it would affect you, then save accordingly.

If either of you are W-2 employees, you should also consider having extra taken out of your normal paycheck so you won't have such a big hit at the end of the year.


Paul Allen
Notre Dame Fan
Montauk, NY
Member since Nov 2007
56965 posts
 Online 

re: taxes on early withdrawal IRA
Are the taxes and penalty taken upfront or on the back end when you file taxes?


PlanoPrivateer
LSU Fan
Frisco, TX
Member since Jan 2004
2204 posts

re: taxes on early withdrawal IRA
Do either of you have a 401k you could have borrowed against? I'm against doing that but it is better than what you are doing.


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30
dirtsandwich
Alabama Fan
AL
Member since May 2016
1573 posts

re: taxes on early withdrawal IRA
quote:

Are the taxes and penalty taken upfront or on the back end when you file taxes?

Not 100% certain but I think the penalty is taken out upfront but the taxes are not.

Also, to the OP, this is a terrible terrible terrible decision. Find another way. You know it is the wrong thing to do.


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10
Jag_Warrior
Virginia Fan
Virginia
Member since May 2015
1018 posts

re: taxes on early withdrawal IRA
Ya know... I just don’t... I mean... For the love of.... Just how fu...

Forget it.


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