I know that, and I understand that. They take the 20% to be sure that the withdrawer pays the taxes on that income up front. I get that. But you said earlier that you paid 20% tax on that withdrawal, initially you did, but that's not the final tax percentage that you will pay at the end of the year. As I said earlier, your taxes at the end of the year is based on your total income for the year, and this 20% tax will be calculated into your final tax percentage, but that is not your final percentage that you will be paying. With you still working also, combined with your 401k withdrawals, you will be paying much higher than 20%, I would bet. It's hard explaining this crap in writing, while trying to keep it short enough to not muddy the waters.