Jeff, a 56-year-old professor, is subject to a 28% marginal tax rate. He has a family emergency and must withdraw $5,000 from his traditional IRA to fund it. How much money will he owe the government for this withdrawal?

Question

Quizplus · Accepted Answer

Since Jeff is under 59½, he will face a 10% early withdrawal penalty on the $5,000, which is $500. Additionally, the withdrawal is subject to his 28% marginal tax rate, which is $1,400. Therefore, he will owe a total of $1,900 ($500 penalty + $1,400 tax).

Jeff, a 56-Year-Old Professor, Is Subject to a 28% Marginal