401k Withdrawal Calculator
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.
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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.
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.
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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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