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[[I recently changed employers, and following the idea that I need to retire debt (which I REALLY
need to do) I am planning on taking a portion of my 401-k for that purpose, while rolling the

Due to my personal situation, I know my tax rate will be lower next year than this year (I had some
extraordinary income that is non-recurring).]]

I've gotta tell you up front that I really hate this idea. I certainly understand your need to retire some debt, but this is a very, very expensive way to make this happen.

Remember that if the distribution is considered "early", you'll get hit with both taxes and penalties on the distribution. You could very easily find 50% of that distribution go to taxes. It's difficult trying to retire debt using 50 cent dollars. Make any sense. So you might first consider trying to find another way...ANY other way that will provide you with the need ed funds to retire the debt, but keep your retirement plan in tact.

That's just my $.02 on the issue...take it for what you paid for it. Let's move on.

[[ Here's the question. If I were to request the final distribution this month, it is valued at the last day
of the month, with a check sent out the 2nd or 3rd week of January.

Do I, therefore, pay the taxes in tax year 98 or 99? ]]

Check with your 401k administrator to DOUBLE CHECK and make sure when they will treat the distribution as being made. Generally you'll pay tax in the year of the actual deemed distribution, not necessarily when you receive the check. Now, there may be some technical "constructive receipt" tax issues here. But my guess would be if the valuation takes place at the end of the month, the distribution will be deemed made on the end of the month.

Now, then, it could be just an accounting entry that takes place at the end of the month, and the funds wouldn't actually be deemed distributed until later in January.

But again, this issue is WAY too important to guess at it. Get the EXACT answer from the 401k administrator.
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