Made a Retirement Account Withdrawal? Here's How the Government Will Tax It
When you really need cash, a retirement account withdrawal can seem like the fastest and easiest solution. It's your money, after all, and no one's going to stop you from taking it out.
But tapping your nest egg could create some headaches for you when it's time to file your taxes. Here's a closer look at how the government taxes some common types of retirement account withdrawals.
Traditional IRAs and 401(k)s are tax-deferred accounts. This means that when you put money into them, you reduce your taxable income for the year. For example, if you earned $40,000 in 2023 and put $5,000 in a traditional IRA, the IRS would only tax the remaining $35,000 when you filed your 2023 return.
Source Fool.com
