40l K withdrawal — costly?
We withdrew from our 401k accounts to purchase our condo free and clear of a mortgage. We are both over 60 years old. What is going to be our tax hell with the IRS and debt we will owe when we file? Thank you for your advice!
Terry Says
My advice comes too late! That was a nutty thing to do. First, all the money you withdrew will be considered ordinary income and added to your tax liability for 2021. In fact, you’d better consult an accountant and make a quarterly estimated payment on January 15, 2022 to avoid any penalty. The amount of the withdrawal will be taxed at your top marginal bracket.
And the truly nutty part of that move is that you will lose all future tax-deferred growth in that account, at a time when you likely could have gotten a 15 year condo mortgage at 2.8%. Bad trade!
