 TITLE: Do Retirement Accounts Affect Your Taxes? CONTENT: 401(k)\n------\nContributions made to an employer-sponsored 401(k) retirement plan aren't counted as part of your taxable income. As such, they aren't eligible for tax deductions.\nNormally, withdrawing money from a 401(k) before age 59½ results in a 10% tax penalty on the amount taken out. The IRS permits some exceptions to the penalty. For example, you can avoid the penalty if you withdraw money after becoming totally and permanently disabled. You can make penalty-free withdrawals from a 401(k) after you turn 59½.\nYou will, however, have to pay taxes on the withdrawals you make from a traditional 401(k) just as though they were normal income. You'll report the income on your 1040 form when filing taxes. Withdrawing from a Roth 401(k) works differently, though, since you've already paid taxes on the money you deposited into the account. END