How to Withdraw Retirement Money Early Without Penalty

9:12 am Uncategorized

Early withdrawal penalties on retirement accounts are there for a good reason – to help you save for retirement, when you will no longer be earning a regular income.

However, sometimes economic conditions leave people with one unhappy option – early withdrawal from a retirement account.  And there are ways you can do this without incurring the extra 10% penalty tax:

Job Loss After Age 55 – if you leave or lose your job and you are between the ages of 55 and 59 1/2, you won’t have to pay an early distribution tax on anything you take out of your old employer’s retirement plan.  However, your withdrawal will still be treated as taxable income, so you will have to pay income tax on it.

ESOP Dividends – dividend distributions from employer stock within an ESOP (employee stock ownership plan) are exempt from the early distribution tax.

Death/Disability – if you die before any distribution is made from your retirement plan, your estate will not be subject to the early distribution tax.  If you become disabled and your disability is considered to be permanent, any distribution made after your disability is exempt.

Substantially Equal Periodic Payments – you can begin taking distributions from a retirement plan at any age if you take them in equal annual installments over your life and/or the joint life of you and your beneficiary.  However, if you want to start taking installment payments from an employer’s plan, your employment must have been terminated prior to receiving the first payment.

For more information on wealth strategies, contact our California estate planning law firm.

Get started by contacting our Orange County asset protection estate planning law firm as soon as possible.

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