As I understand it, any withdrawal from a 401(k) requires a 20% Federal tax withholding. And if one separates from their company, post-50, there's no penalty for early withdrawal. A dry run of 2014 taxes shows no federal tax due at all on the intended $60K withdrawal. A combination of Property tax, some mortgage interest, rental losses carried forward for two decades, etc. For such a couple, is there any way round this withholding requirement?
59-1/2 is still a few years away, so an annual IRA transfer would do it, but for now, any ideas?Seems a shame to have a forced annual loan to the government.