Kathleen, age 56, works for MH, Inc. in Dallas, Texas. Kathleen contributes to a
ID: 2534759 • Letter: K
Question
Kathleen, age 56, works for MH, Inc. in Dallas, Texas. Kathleen contributes to a Roth 401k and MH contributes to a traditional 401k on her behalf. Kathleen has contributed $10,500 to her Roth 401k over the past six years. The current balance in her Roth 401K account is $17,500 and the balance in her traditional 401k is $14,000. Kathleen needs cash because she is taking a month of vacation to travel the world. Answer the following questions relating to distributions from Kathleen’s retirement accounts assuming her marginal tax rate for ordinary income is 28%.
a. If Kathleen receives a $3,500 distribution from her traditional 401k account, how much will she be able to keep after paying taxes and penalties, if any, on the distribution?
Explanation / Answer
Following information is given
If the employee is working from traditional 401k and withdraws in the age bracket 55 to 591/2 . the penalty is 10% on amount withdrawn
Calculation of net distributions
= $3500 - [3500*(10%+28%)] = $2170
The net distributions received by Kathleen is $2170
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