Assuming you are UNDER the retirement age.... here's what will happen: The "tax" you paid during withdrawing the money was a penalty. Now you have to pay taxes on the money. So add up ALL THE MONEY. The 401k withdrawl PLUS your earnings PLUS your wifes earnings PLUS whatever other earnings you made. Now that is your TOTAL. Now you are in the highest tax bracket known to man. You are going to be taxed at about the 26 percent bracket. My tax man said, "If you would have spread it out between last year and this year, you would have saved THOUSANDS. If it makes you feel any better.... you are not the only one in that boat.