Planning For Retirement Distributions

This page covers the following topics:

• Early Distributions 
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• Required Minimum Distributions 
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• Lump-Sum and Periodic Distributions 
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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,
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• A qualified employee annuity plan under section 403(a),
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• A tax–sheltered annuity plan under section 403(b) for employees of public schools or tax–exempt organizations, or
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• 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.
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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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