Uncensored2008
Libertarian Radical
The fact is when we pull all of the money out of our 401K, if we put it in an IRA account, we would only pay income tax on the portion we withdraw each year. This withdrawal will be taxed as ordinary income, but is exempt from any payroll taxes.
You'll only pay income tax on the principle sum, the initial investment. Any appreciation or interest will be taxed as capital gains. You do NOT pay income tax on 401K earnings.