Q: What would Massachusetts State tax, Federal Tax and any fines and fees be on early withdrawal of a retirement fund?
I am disabled and collecting SSDI in Massachusetts. My spouse has offered an out of court divorce settlement of a TIAA in with four accounts totaling $110,000 (Qualified Retirement Plan, Tax sheltered annuity plan, Tax-deferred annuity Plan, Define Contribution retirement plan).
I would like the cash to buy a condo, or buy in as partial owner of my mother’s house. I would not like to roll this into my own retirement fund. I receive Medicaid and would not be allowed to keep the retirement account, and would have to spend it down in order to still be eligible for assistance.
A:
Federal would be ~24% depending on other income and deductions and 5.05% for Mass.
Because the transfer is pursuant to a divorce your spouse doesn't have any tax ramifications for withdrawing the funds and you only have to pay tax on taxable withdrawals, no early withdrawal penalty. You have to have a QDRO.
You should also consider the effect of an income spike on your SSI.
I would hire a professional to make sure the separation agreement does what you think it should do, the QDRO is properly drafted, and you can minimize the tax hit of a lump sum payout
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