New 401k contribution caps?

Discussion in 'Politics' started by Northern Flash, Oct 23, 2017.

  1. jimmy g

    jimmy g Kook

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    They still hold out 20%, by law, on withdrawals. Have to wait til end of year to make the tax on withdrawals work out lower.
     
  2. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    That is ONLY for early withdrawals. (before you turn 59 1/2 years old.)


    https://www.fidelity.com/viewpoints/retirement/cashing-out
     
  3. jimmy g

    jimmy g Kook

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    I'm 63. They hold it out on me.

    Needed a new septic system. Told wife I Refused to borrow. Would rather pay tax than interest.
     
    Last edited: Oct 28, 2017
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  4. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    Is that because you are still working and making too much money, which puts you into a higher tax bracket?

    I don't know of any such 20% automatic tax on a withdrawal. It's usually just the amount of your annual income that decides the tax bracket that you fall into. And you are still making a regular wage on top of your withdrawal from your 401k.
     
  5. jimmy g

    jimmy g Kook

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    Its Income. They told me it's federal law, withholding tax. They never asked my income or job status. They send a tax report with the check and at year end.


    Edit. Your article states 20% taxes are witheld.
     
    Last edited: Oct 28, 2017
  6. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    So you are saying that you are losing 20% ON TOP OF your regular income tax?
    A 401k withdrawal IS considered income, but it shouldn't have an extra 20% taken out of it.
    If you deposited into your 401k pre-tax, you do have to pay the taxes on it now. But that is to be expected.
     
  7. ABFer

    ABFer Super Moderator Staff Member

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    Face it Flash, you're in denial. Let's take Fidelity's scenario there that $5800 was put away and 35 years later $58,000 was withdrawn. At 25% the tax not paid on that $5800 is under $1500. Now, if tax paid on that $58,000 was only 3% it is going to be more than $1500. Do you understand? What is it that you're not seeing?
     
  8. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    It sounds to me like you are looking for an argument, not a conversation. Re-read your above post, you sound like a dick, looking to insult.

    This is your own quote.......
    You invest how you want to invest, and I'll invest how I want to invest. To each their own.
     
  9. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    Yes. For EARLY withdrawal. For someone who isn't over 59 1/2 years old.

    For those over 59 1/2, your withdrawal money is just taxed as normal income. So I don't understand why you are getting taxed the extra 20% that you claim you are.
    You didn't pay taxes on that money (pre-tax deposits out of your check), so at withdrawal time, you have to pay the taxes on it.
     
  10. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    And since you wouldn't have that same amount of growth (total, since you wouldn't have gained as much profit over the years,) you wouldn't have the higher amount to even withdraw. What part of that don't you understand?
     
  11. ABFer

    ABFer Super Moderator Staff Member

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    I don't understand how taxes on $58,000 is not going to more than taxes on $5800 regardless of tax bracket.
     
  12. CCXdriver

    CCXdriver Well-Known Member

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    Because you have to look at the percentage, not total tax paid.

    Of course the dollar amount paid will be higher on $58,000, but who cares? Your money grew tenfold, and you reduced your tax liability today.
     
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  13. ABFer

    ABFer Super Moderator Staff Member

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    I know that, I am talking about the total amount of tax that the gubment will collect on 401K deposits in the long run. Put $5,000 away today and leave it for twenty years. It should be $20,000 by that time. Would more tax be collected on the $5,000 had it not been put into a 401K or the $20,000 while allowing for a lower tax rate when withdrawing the $20,000.
     
  14. jimmy g

    jimmy g Kook

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    better reread. It says they withhold 20%. Doesn't designate early when it says that. And, I KNOW Fidelity does.

    It's Income. Federal Law dictates withholding.
     
  15. jimmy g

    jimmy g Kook

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    No. They withhold 20%. Its not extra. Its the same as employers withhold, only cant claim dependents when you recieve it. They Send you a statement. At tax time, you show that you've paid 20% and the amount as income when you file. Exactly as a W2 end of year statement, but on a 1099 Misc Income form. It all gets added together as income, and all the withholding added together as credited taxes. You file on the total, and get a refund, I'm sure.

    The problem is only, that if you want to take out $10,000, you have to take out $12,000. Plus someone under 59 1/2 would have to take out $13,000 to hold $10,000 in his hand.

    Retirees better plan on having that 20% withheld until tax filing to get it back.
     
    Last edited: Oct 28, 2017
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  16. CCXdriver

    CCXdriver Well-Known Member

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    Bird in the hand versus two in the bush.

    They want to spend the money today, not wait twenty years.
     
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  17. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    I have looked everywhere trying to find where a 401k is automatically taxed 20% when you withdraw it after age 59 1/2. It is non-existent. So I don't see how you were told that it's automatic or federal law.
    As I said earlier, your 20% that you are getting taxed must be based on your current income for the year.


    I'm not sure why you aren't seeing that my article states that the 20% is for EARLY withdrawals, not for withdrawals made after 59 1/2 years old.

    Look.....
     
  18. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    Exactly. The Govt. wants our tax dollars today, not in 20 years. That way they can waste the money immediately.
     
  19. Northern Flash

    Northern Flash Piss on our Flag, get a boycott against you.

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    That is correct. If you want a certain amount left in your hands, you have to factor in the income taxes that will be taken out.

    This is NOT correct. A retiree is going to pay the taxes on that 401k withdrawal, but you aren't getting it back. It is getting taxed as regular income, and it won't get refunded in any way, shape, or form.

    And since you are working and drawing off your 401k also, your income is probably high enough that you are now in a higher tax bracket, which is why your income tax percentage has gone up.
     
  20. jimmy g

    jimmy g Kook

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    I don't see where you seem missing my point. Its Income. Its payment on the tax due. Fidelity is required to hold it out. Wages made, taxes are withheld, just like an employer is required to do. At the end of the year, unless your taxes are higher than 20%, a portion of tax is refunded when your income is filed.

    Just like the article you quoted says. Its Not Extra tax, it's regular tax. Read your own quote:

    Taxes and early 401(k) withdrawal penalty
    There also is an immediate cost to cashing out. For one, it can generate a large tax bill. Your plan administrator is typically required to automatically withhold 20% of your withdrawal and send it directly to the IRS to cover the taxes you may need to pay on that withdrawal.


    It doesn't say taxes ON early withdrawals. It says AND early withdrawls. 20% is withheld on all transactions. 20% plus 10% are withheld on early withdrawals. I know, I've dealt with them. If you are still disagreeing- call Fidelity.....

    I think we're saying the same thing, in different languages....
     
    Last edited: Oct 29, 2017

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