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The 10% penalty applies to
the entire untaxed amount that you withdraw. If you withdrew $5,000 from your 401(k)
before you were 59 ý, you would owe a penalty of $500, plus applicable federal, state and
local taxes on the entire $5,000.
If you've made after-tax contributions to your 401(k), it gets a bit more complicated. You
do not have to pay the 10% penalty or any additional taxes on the amount of your after-tax
contributions. You do, however, have to pay the 10% penalty and all taxes due on any
interest earned and employer-matching contributions made as a result of your after-tax
contributions.
If you're thinking "I'll just take out my after-tax contributions and leave the
earnings where they are" – nice try, but no dice. For every after-tax
contribution dollar you withdraw, the IRS requires you to withdraw a proportional amount
of the earnings, too. |
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