In article <99135096.0406101141.1131ef08[at]posting.google.com> , iou1
<iou12003[at]yahoo.com> wrote:

- quote -

Someone else pointed out that you have to pay both the taxes and
the penalties. What I would like to ask is a little more subtle,
and that is exactly what to you plan to use to buy food when you
are 72 years old? You see, a 401K plan is for your retirement,
not for a mid-life vacation. If you don't keep your 401K and IRAs
going, you will likely end up having to live off of welfare and
chairty (aka, social security) when you are old, assuming it is
still there for you when you retire.

-john-

--
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John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
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iou1 wrote:
- quote -

You always need to pay income tax on the withdrawal, plus you'll need to
pay the penalty unless you're older than you sound from your post.

Not that you asked, but I always jump on the chance to suggest it...if
you're taking two years off you might consider rolling over that 401k
money to an IRA, then converting that IRA to a Roth. If you literally
aren't working and live off savings, your income will probably be low,
and if so your tax bracket will be low - might even be zero.

So doing that would convert say $40,000 in BEFORE-TAX retirement money
to $40,000 in AFTER-TAX money that will never again be taxed, as long as
you meet the rules for withdrawing from the Roth. You'd be increasing
your retirement savings substantially, by not working - such a deal!

Of course if you're considering cashing in the 401k to take the two
years off the plan might not be feasible for you...?

-Tad

Dear All:

I have been contributing to 401(k) for the last 3+ years. However, if
I decide to take a break in my career and not work for say the next 2
years, is it possible for me to withdraw say $12,000 per year (or
whatever the maximum yearly non-taxable income is) from my 401(k) and
treat it as my income for that year? If so, I just need to pay the
penalty for early withdrawal and not income tax, correct?

Many thanks.

IOU1