How Much Will My 401K Be Taxed? 
It depends on what income bracket you fall into , meaning it will be taxed like ordinary income , but if you take it out before 59 1/2 you will have to pay a penalty and federal and state taxes.Your actual federal tax rate will depend on your ordinary income tax bracket , which is more commonly 25 % -28 % for middle income Americans . PLUS you will pay an additional 10 % penalty AND state income taxes . In short , it is not a savings plan and specifically for long-term , retirement accumulations . If you use it for other purposes , you will lose 40-50 % in taxes.However , upon retirement you will pay only ordinary income taxes , without the penalty very much like you do with your current paycheck . The 401 -LRB- k -RRB- is designed to replace that paycheck when you are too old to work . 