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Updated over 7 years ago on .
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401k early withdrawal vs Withdraw later at higher tax rate
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Have you considered converting the money to a Roth IRA? That would allow you to pay tax on the seed today, then have a tax-free crop in the future. It would cost you the 25% current tax rate to convert the money today (with no 10% penalty). You would then have a significant amount of tax-free money in the future.
I ran a quick calculator and if you do not add to the $25K with new contributions and average 7% return, it would be worth $190K in 30 years.
You could do that within the conventional brokerage sphere or with a self-directed IRA for investing in real estate. Either way, you could really come out way ahead.