Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Your taxes will most likely be higher than 30%

I don't know your Federal Tax bracket, so I'll assume the most common 28%.  Soyou've now paid the Feds 28%.  Then there is the matter of State & Local Incoem tax.  State tax averages around 6%, your state may have less or more.  If you live in a large city, then you may have an additional 1 to 1.5% tax. We'll assume you live in a nice town with no city or county incoem tax.
28% Federal + 6% State, now we add the 10% penalty
total 44%
So, of your $5,000 you'll have $2,800 if my math is correct.
 A pure profit sharing plan is just the employer contributing money to the employees,  the employees do not contribute.  A 401k with the profit sharing will allow the employees to save money from their paychecks on a pre-tax basis.  You can lower your taxable income by the amount you choose to save into the plan.
I would keep the money in the plan and only contribute a little until your debts are paid off, then each year that you get a raise, I would increase my contributions to the 401k by 1%.  Lets say you get a 4% raise, take 1% of that and contibute it to the 401k.  Your take home pay still goes up by more than 3%.  Remember that additional 1% you contribute will lower the overall taxes you pay.
Hope this helped.  If not, please follow up.

Bill
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.