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Planning For Retirement Distributions

This page covers the following topics:

  • Early Distributions 
  • Required Minimum Distributions 
  • Lump-Sum and Periodic Distributions 

Early Distributions

10% Additional Tax on Early Distributions

To discourage the use of retirement funds for purposes other than normal retirement, the law imposes a 10% additional tax on certain early distributions of these funds. Early distributions are those you receive from a qualified retirement plan or deferred annuity contract before reaching age 59 ½. The term "qualified retirement plan" means:

  • A qualified employee plan such as a 401(k) plan,
  • A qualified employee annuity plan under section 403(a),
  • A tax–sheltered annuity plan under section 403(b) for employees of public schools or tax–exempt organizations, or
  • An eligible state or local government section 457 deferred compensation plan, but only to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed above or an IRA.

Distributions that are not taxable, such as distributions that you roll over to another qualified retirement plan or a distribution of your designated Roth IRA contributions are not subject to this 10% additional tax.

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