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Solved

Do I have to pay extra taxes on a 401K early withdrawal if the company I was working for shit down?

Forum|Forum|2 years ago
January 28, 2024
2 replies
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Best answer by dmertz

The company shutting down is not a exception to the early-distribution penalty.

dmertzAnswer

Employee

The company shutting down is not a exception to the early-distribution penalty.

Employee

If the 401(k) plan is canceled, and you receive a check for your balance because it was withdrawn from the plan, you have 60 days to deposit it into a private IRA that you can open at many banks or brokers, or to deposit it with the workplace plan of your new job. This is called a rollover, and if you complete the rollover within 60 days, then your money continues to grow for retirement, and it is not taxed.

If you keep the money instead of doing a rollover, then you pay income tax plus a 10% penalty for early withdrawal.