What the calculator does and does not compare
A taxable withdrawal sends retirement-plan money to the individual. The taxable portion that is not rolled over is generally included in income, and early distributions before age 59½ may carry an additional tax unless an exception applies.[1] [3] A ROBS transaction instead uses a qualified plan sponsored by a C corporation to buy employer stock. That can generally avoid immediate distribution tax when validly structured, but the plan receives private employer stock and the arrangement carries valuation, administration, prohibited-transaction, and audit risks.[5] [6]
Assumptions, exclusions, and examples
Excluded: personal cash reserves, business return, tax brackets created by the distribution itself, state-specific rules, plan-document restrictions, Roth ordering rules, net unrealized appreciation, required minimum distributions, loan offsets, indirect-rollover replacement funding, professional fees not entered, financing from other sources, and losses if the business fails.
Frequently asked questions
Does the calculator decide whether ROBS or a taxable withdrawal is better?
No. It compares gross distribution, estimated final taxes, optional withholding timing, ROBS cash costs, retirement assets removed or committed, and funding gaps. It does not rank the scenarios or declare a winner.
Does the 20% withholding line add a second tax?
No. Withholding is modeled as cash held back at distribution and credited against the estimated final tax liability. If the final tax estimate is accurate, the difference is an estimated refund or balance due, not another tax layer.
Can the calculator tell whether the 10% additional tax applies?
No. The user must explicitly choose whether to apply an additional-tax rate. Age 59½ status and exceptions under IRC section 72(t) depend on facts the calculator does not determine.
Is ROBS always tax-free?
No. A ROBS can generally avoid immediate distribution tax only when eligible assets move through a valid rollover into a qualified plan sponsored by a C corporation and the plan buys employer stock at proper value. Operational failures, prohibited transactions, valuation problems, plan disqualification, or later distributions can change the tax result.
Why does taxable percentage default to 100%?
The default represents a simple fully taxable pre-tax example. Users should change it only when they have a basis, Roth, after-tax, or other taxable-portion estimate from account records or a tax professional.
If ROBS remains viable after the tax comparison, build ongoing fees with the ten-year ROBS cost forecast.
Primary sources checked Aug. 12, 2026
These sources support federal mechanics and IRS ROBS concerns. They do not provide individualized legal, tax, valuation, fiduciary, investment, or state-law advice.
- [1] IRS Publication 575, Pension and Annuity Income
Primary IRS publication supporting ordinary-income treatment of taxable pension and annuity distributions, basis and after-tax recovery complexities, early-distribution tax references, and withholding treatment. Checked Aug. 12, 2026.
- [2] IRS rollovers of retirement plan and IRA distributions
Primary IRS rollover page supporting direct rollover treatment, taxable distribution consequences, and the rule that eligible rollover distributions paid to a participant are subject to 20% mandatory federal withholding while IRA withholding differs. Checked Aug. 12, 2026.
- [3] IRS retirement topics: exceptions to tax on early distributions
Primary IRS page supporting that early distributions before age 59½ may be subject to an additional 10% tax unless an exception applies. Checked Aug. 12, 2026.
- [4] IRS Publication 590-B
Primary IRS IRA publication supporting the principle that the 10% additional tax applies to the portion includible in gross income and that Roth and basis rules can change the taxable amount. Checked Aug. 12, 2026.
- [5] IRS ROBS compliance project
Primary IRS ROBS source supporting the C corporation and qualified-plan stock purchase structure, business-failure observations, valuation and recordkeeping concerns, Form 5500/Form 1120 issues, and the boundary that a determination letter does not approve transaction operation. Page last reviewed Nov. 16, 2025; checked Aug. 12, 2026.
- [6] IRS TE/GE ROBS guidelines memorandum
Primary IRS memorandum supporting examiner attention to adequate consideration, start-up stock valuation, promoter fees, employee participation, and prohibited-transaction analysis. Checked Aug. 12, 2026.