The purpose of this 401k withdrawal calculator is to show you how much money you will actually receive if you make a withdrawal from a 401k or other tax-deferred retirement account.
Many situations arise where you might consider withdrawing funds from your 401k retirement account. But should you do it? And if so, how much should you withdraw? You may have to pay withdraw penalties. You will almost certainly pay withdrawal taxes. How much of what you withdraw from your 401k will you actually receive? These and other scenarios are what this 401k withdrawal calculator helps you answer.
It’s important to realize that the same calculator can also work for 403b withdrawals, traditional IRA withdrawals, and other retirement plan withdrawals. Any qualified retirement plan that defers its taxes will encounter similar tax and early withdrawal penalty scenarios.
Use the definitions and explanations that follow to help use the calculator and find out how much you’ll get if you make a withdrawal.
Table of Contents
This question heavily depends on the type of withdrawal you are planning. If from a regular bank account, just look at your balance and see if you have enough to withdraw your desired amount, not neglecting the other payments such as bills that may also be taken from the same account that month.
If a retirement account withdrawal, it depends on your age, your tax rates, and the type of retirement account. Another factor is, is this a one-time withdrawal, or will you be taking money out every month or some other number of times per year?
The formula for 401k withdrawals begins with the amount you want to withdraw. Here’s the math you will have to do:
Withdrawal amount – 10% penalty (if under age 59 ½) – federal taxes – state taxes = amount of money you will receive from 401k withdrawal.
To calculate how much you will receive from a retirement account withdrawal, begin with the amount you want to take out. From there, subtract a 10% withdrawal penalty if you’re under age 59 ½. Then, multiply the withdrawal amount by the federal income tax rate percentage for your tax bracket, and also by the state income tax rate percentage.
Subtract both taxes and the penalty from the amount you withdraw, and you’ll be left with the amount of money you will actually receive.
For example, consider a $5000 withdrawal at age 50, with a 10% federal tax rate and a 5% state tax rate, plus the 10% early withdrawal penalty.
Federal taxes would be $500. State taxes would be $250. And the 10% early withdrawal penalty would be another $500. Subtracting those three numbers from $5000 leaves you with $3750.
Very similar to calculating a 401k withdrawal, you must take the amount you want to withdraw, multiply that by both the federal and state incomes tax rates, and also take out a 10% early withdrawal penalty if you will be doing this before age 59 ½.
Then, subtract those three figures from the amount you withdraw, and the remaining number is how much money you will actually receive.
A retirement withdrawal calculator such as the one on this page can answer this question best. Assuming this is a traditional IRA and not a Roth IRA, you will have to pay income taxes on the withdrawal. Assuming you are over age 59 ½, you will not have to pay the 10% early withdrawal penalty.
The challenge here is that the tax rates may change depending on how much you will be cashing out. If you have a small IRA account with just $5000 in it, your tax rates probably won’t change. But if it’s a larger amount, such as $100,000 or $500,000, cashing out the entire account all at once will very likely bump you up to a higher tax bracket, which means you will pay more in taxes.
Currently, the highest tax rate is 37%, for married filing jointly households making over $648,000 in annual income. Six more tax brackets sit below that one. So whichever bracket you’re currently in, if there’s even a mid-sized amount in your IRA, like $50,000, and you want to cash out the entire amount, there’s a pretty strong chance you will increase your federal tax rate.
For a traditional IRA, this is very difficult to do because the money was deposited in the account pre-tax. You never paid taxes on your IRA contributions when they were taken out of your paychecks all those years. So, when you withdraw that money, that’s when the tax bill comes due.
However, when you start looking into things like charitable trusts, gifts to heirs, and donations, there are ways to use the money such that the government doesn’t get as much of it. The details of these processes can get complicated, and your best approach is to consult with a financial advisor or wealth manager.
Like a traditional IRA, avoiding taxes on a 401k withdrawal is tough because the money in that account has never been taxed. In most cases, it was taken out of your paycheck before your taxes were computed, and put straight into the 401k. Thus, when you withdraw it, now that money must be taxed.
As with an IRA, to avoid taxes on a 401k withdrawal, you have to get creative. It will usually involve donating some of the money to charity, gifting it to your kids, creating a trust, or working with a tax account or wealth manager to determine the optimal amount to withdraw each year.
No. There is no correlation between Social Security and retirement account withdrawals. Your Social Security payments are calculated based on income earned during your working years.
After age 60, there is no effect on the federal or state income tax rates that you will pay when withdrawing from a 401k. The only thing that changes after age 60 (actually 59 ½) is that the 10% early withdrawal penalty goes away. But the tax rate will not change, unless the 401k withdrawals combine with your other income to bump you up into a higher tax bracket. But that calculation has nothing to do with your age.
Now, if you retire from your job, meaning your income goes down, and then make 401k withdrawals, your tax rate may stay the same as now, since the 401k money is making up the lost income from the job you retired from. But the details will be different for everyone.
To determine this, you need to know the federal and state incomes tax rates where you live and for your level of income and tax filing status, such as single or married filing jointly. Multiply each tax rate by the amount you have in your account, and subtract the results from the total.
If you’re older than 59 ½, you will avoid the 10% early withdrawal penalty. If you’re younger, you need to subtract that as well. The 401k withdrawal calculator on this page makes these calculations easy.
Definitions of 401k Withdrawal Calculator
Want to know how much will be taxed on a 401k early withdrawal? Do you need to know how big your withdrawal penalty will be if you’re taking money out before age 59 ½? Our 401k withdrawal calculator will make it easy and do the math for you.
Why is this helpful? Because before deciding to withdraw money from your 401k, you need to know what will actually happen. You’ll lose some of it to taxes right away. In most cases they will be withheld from your withdrawal amount, much like happens with a paycheck if you are a W-2 employee. But the penalties may not get assessed until you file your taxes for that year. That means you might get shocked with having to pay a huge penalty come tax time.
Don’t get caught in this trap. Use the calculator and know what to expect if you withdraw from your 401k.
The good news is, if you’re looking for a 401k withdrawal penalty calculator, a 401k withdrawal tax calculator, or a retirement withdrawal calculator, what you’re about to use can serve all those purposes.
Here’s how to use our 401k withdrawal calculator.
Retirement Plan Withdrawal Calculator Definitions
To use the 401k withdrawal calculator below, you need just four pieces of information:
- Amount of money you want to withdraw
- Age you will be when you withdraw the money
- Federal income tax rate
- State income tax rate
You can start using the calculator right away, or if you want to be sure you’re using it correctly, use the following explanations of these four terms.
Amount to Withdraw
Enter the amount of money you wish to withdraw from your qualified retirement plan. Again, this could be from a 401(k), a 403(b), a traditional IRA, or another type of plan that defers taxes.
How do you know if your plan defers taxes? If you’re contributing to your retirement plan automatically as part of your paycheck, and you never actually ‘see’ the money in your regular bank account before it goes to your retirement account, then you probably have a pre-tax or tax-deductible retirement contribution plan.
In such cases, money goes straight to the retirement account, and has not yet been taxed. This means that when you withdraw it, the money and any investment gains produced will be taxed as both federal and state income. The calculator you’re about to use will show you how much you would pay at various tax rates.
This 401k calculator assumes your retirement contributions have not yet been taxed. If that’s not the case for you, meaning some of your contributions have already been taxed, your situation will be more complicated than this 401 calculator can address, and you should consult a tax or financial advisor.
You can start by entering your current age if you want. But a better approach is to enter the age you will be when you expect to withdraw funds from your 401k. In other words, if you’re 45 now, but are thinking about withdrawing from your 401k when you’re 50, enter 50 in the calculator.
If you want to know your retirement scenarios and want to avoid a 401k withdrawal penalty, enter any age from 60 or above, because the early withdrawal penalty only applies if you withdraw funds before age 59 ½.
You’ll notice this in the 401k withdrawal calculator by moving the slider along the current age line. Once you pass age 60, the penalty goes to zero.
Federal Income Tax Rate
Enter your estimated federal income tax rate in the third space in the calculator. If you’re not sure what your tax rate is, the calculator assumes 25%. You can also consult your recent tax returns or talk to your tax accountant or financial advisor to get a more precise figure.
Or, for a quicker approach, just use the table below for a good estimate, which shows federal income tax rates for various levels of taxable income and household situations.
[Insert the federal tax table here that appears on the dinky site]
State Income Tax Rate
For the last field, enter the current marginal state income tax rate you expect to pay.
Every state has a different income tax. For a high tax state like California or Oregon, this will be a high number, and it will take a sizable bite from your 401k withdrawal. If you live in a no-income tax state such as Florida, Wyoming, or Washington, you can enter zero.
How to Use the 401k Withdrawal Calculator
Enter the numbers for those four fields you want to start with, and then play around with them a bit. Try different withdrawal amounts. Change the age you might withdraw from your retirement account and see how that affects the amount of money you will receive.
While it’s unlikely the tax rates will change for you, larger withdrawal amounts can bump you up to a higher tax bracket. Use the federal income tax table as a guide
For example, suppose you want to withdraw $20,000 from your tax-deferred retirement account, you are married, and your household made $70,000 this year. With that extra $20,000 – which counts as taxable income – you will now have made $90,000 for the year. As the table shows, that will bump your federal tax rate from 12% up to 22%. That’s a big jump. Even worse, it would mean a $19,800 tax bill – almost the same amount you withdrew from the 401k!
Consider those sorts of factors when you use our 401k withdrawal tax calculator. As the example shows, you may need to adjust the tax rate if the amount you withdraw combines with your income to bump you to a higher federal tax rate.
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