401K withdrawl

My mom just turned 60 and wants to withdraw a portion of her 401K and roll the rest into a tradtional IRA. She works in NJ but her 401K plan is with a company called NY Life based in NY.

She was told that she would have to pay NJ and NY taxes on any withdrawl since it's out of state. I never heard of this. I thought you just pay taxes on whatever tax rate you are in when you withdraw?

Maybe she is better off rolling over into the Tradtional IRA first then withdrawing from there?

It's not her fault her company chose a company out of state, but the tax part does not make sense.

Any advice would be greatly appreicated

Giacona,

Is your mother still emplyed by the 401k spnsor?
If not, she can transfer the 401k to a TIRA, then take the distribution she wants.

If she is still employed by the 401k sponsor the rules of the 401k may not allow a distribution or a transfer to an IRA. You/she should read the 401k Summary Plan Description. The rules for taking money from the 401k are in that plan, and will describe the tax effects. Make sure you are reading the latest SPD.

No matter what, she would only have to pay Federal and NJ tax on the 401k IRA distribuion.

Maybe she is better off rolling over into the Tradtional IRA first then withdrawing from there?

: ) This may actually simplify things!

One thing to note; if you pay NY taxes, you'll get a tax credit for that payment in NJ. IE: There won't be a situation where you get double-taxed bacause you wind up paying two different states.

You should have your return prepared by a CPA or a qualified tax preparer. She/he can get the details of the situation first hand, make inquiries, and handle the situation accurately and to your best advantage.

It's too bad that taxes are so complicated that it's difficult to prepare them yourself, but I don't see the situation getting better; in fact it's getting worse!

: ) This may actually simplify things!

It's too bad that taxes are so complicated that it's difficult to prepare them yourself, but I don't see the situation getting better; in fact it's getting worse!

And all the citizens said, "AMEN!"