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ROCHESTER, Minn. (KTTC) – As the shopping season continues, there are some things people can take into account before bringing home presents this year.
Pulse Financial Planning’s Matt Elliot offered some ways shoppers can better plan and budget for both this year and the years to come. One recommendation he made was for shoppers to be aware of the risks that come from withdrawing from a 401K or retirement plan for holiday shopping. He explained how there are major tax implications that could negatively impact the growth of these plans.
“It will be listed as either a traditional or pretax, and if you’re withdrawing from a traditional or pretax retirement plan you will owe income tax on the distribution and also if you are under the age of 59 and a half there will be an additional ten percent penalty for withdrawing prior to that age,” Elliot said.
Elliot also explained how for most retirement plans in the 22 percent federal tax bracket, withdrawing $1000 from it, after federal and state taxes, for the distribution would only give you around $600. He also recommends for shoppers to budget and set aside money throughout the year to avoid these issues.
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