Withdrawals from a traditional 401(k) are taxed as ordinary income. If you are under 59½, a 10% early withdrawal penalty usually applies on top. The calculator shows the extra tax your withdrawal adds to the year.
How 401(k) withdrawals are taxed
- The full amount is added to your other taxable income for the year.
- Plans must withhold 20% for federal tax on a withdrawal paid to you. That is a prepayment, not your final bill.
- Before age 59½ the 10% penalty applies unless an exception fits, such as disability or the rule of 55 for the plan from your last employer.
- Roth 401(k) qualified withdrawals are tax-free.
Ways to reduce the tax
- Spread withdrawals over several years to stay in lower brackets.
- Time withdrawals for a low-income year.
- Consider a direct rollover, which has no tax or withholding.