Penalty-free 401(k) withdrawals still not on the agenda (Obama breaks a promise)

Politi-fact ^ | April 10, 2009 | Angie Drobnic Holan

[Michaelo]

For some people, including taxes, it would reach 40%. From an ABC News analysis earlier this year:

"Take a $10,000 early withdrawal from a retirement plan, and you could easily lose 40 percent to taxes and penalties, depending upon your tax bracket and where you live.

http://abcnews.go.com/Business/PersonalFinance/story?id=6941661&page=1

[babygene]

“For some people, including taxes, it would reach 40%.”

Were talking about money in an IRA that hasn’t been taxed. Of course you have to pay the tax, you can’t describe that as a penalty for taking it out early.

The penalty is 10%.

[Secret Agent Man]

If you withdraw before 59 1/2 and don’t have one of the several emergency reasons to do so (which waives the penalty), you get a 10% penalty for early withdrawal, and 20% of it is withheld for paying upcoming taxes on the money.

Trust me, I know this.

[reformedliberal]

Actually, it is already happening, AFAIK. In some circles, the *code* for it IS *patriotism* (or so I am told). Mostly, it is folks with cash or cash portions of their business, but there are people on unemployment due to layoff/firings/closings who are working off the books for cash while drawing unemployment. They are working mostly as handymen or doing some sort of yardwork, house cleaning, craft sales, etc.

There will be some way to fight this, if zerO lasts long enough, I am sure. They can get rid of cash, given enough time or a big enough *crisis*. OTOH, maybe not, as many of zerO’s low income voters are into this, not only professionals and high-tax individuals. People on government subsidies aren’t worried about taxes, but most of them can’t live on the stipend, need extra money and SS will not be there for them, anyway or is very far away because of their age. Underground economy money still adds to velocity, so it props up the economy as well as salaries, dividends and profits.

In Spain, friends say that many have their official taxable job and their unofficial job or small business, which is off the books.