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What percentage of taxes should I withhold from my IRA distribution?

Asked by: emeka22uche 1198 views YA Discussion

I have an old 401k I’m thinking of cashing out. It’s from a previous job and is only $ 2500. On the IRA distribution form, it gives me the option to withhold taxes, both federal and state. I know there is an automatic 10% penalty since I’m not at retirement age. Should that be the amount I withhold for federal? And I know that I also have to take out 25% for my tax bracket. So, would that mean I have to withhold 35% federal? And I have no idea what to withhold for state tax, I’m from NJ. Any help is appreciated. Thanks.

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3 Answers



  1. tro on Apr 30, 2012 Reply

    unless you really need the money roll it over to an IRA with the 60 day limit and deal with the tax situation at a later date
    the $ 2500 might not have a major effect on your gross income and unless you are in a really high tax bracket it definitely will not be 25%
    is the $ 250 penalty worth it?

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  2. acmeraven on Apr 30, 2012 Reply

    For an early withdrawal figure about a 40% total federal and state tax bite.

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  3. Erik on May 01, 2012 Reply

    first look and see whethe ryou can roll it over into your new employer’s plan, or whether it makes sense to just keep it wher eit is.

    sounds like it would be 6.37% for NJ state. For federal your 35% sounds right. Being 1% off isn’t that big of a deal, would mean $ 25 only, so make sure you put aside about 40% for next year’s tax filing.

    odds are you wont get bitten by estimated taxes (since the amount of money is so small). I actually cashed out a $ 250 IRA last year since the annual fee were just going to reduce it to 0 anyway.

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