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Tennessee-TN 401k Rollover TN 401k Rollover Doesn't Have To Be Complicated. 401k Rollover Options in TN. Early Distribution from Your 401k Account. New 401k Account or IRA. |
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Changing jobs in TN and wondering what to do with your 401(k) account? If you don't take action within a certain period of time, your plan administrator may tell the financial institution who manages your 401(k) account to distribute the funds to you. Receving this "automatic" distribution might seem like the easiest decision, but the Internal Revenue Service calls this an "early distribution (withdrawal)".
Effects of an "early distribution" The financial institution will automatically tax all funds payable to you at the rate of 20%, plus any other tax you might owe which exceeds that amount. Your proceeds may also be subject to a 10% early withdrawal penalty if you are under age 59 1/2.
Let's assume you have $50,000 accumulated in your 401(k) and you decide to take the early distribution . . .
20% tax on $50,000 = $10,000 10% early withdrawal penalty = $5,000 This leaves $35,000 of the original $50,000 payable to you. THIS TRANSACTION JUST COST YOU $15,000 !
(You, of course, may get some of the tax back at the end of the year, when you file your tax return, however, you could end up paying more tax if your tax rate is greater than the 20% rate which has already been paid.)
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Carlton Group Insurance Services, Inc (the Company) is authorized to solicit and transact business on behalf of MetLife® Bank in the state of Tennessee. The Company is currently licensed by the Tennessee Department of Commerce and Insurance to solicit and take applications for life insurance; health insurance; annuities; and auto and home insurance in the entire state of Tennessee. |
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