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Retirement tax questions

Unfortunately, yes.

Generally, if you are under age 59-1/2, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your pension plan or traditional IRA. Distributions before you are age 59-1/ 2 are called early distributions.

The IRS Retirement Topics - Exceptions to Tax on Early Distributions lists the exceptions to the additional tax:

  • Separation from service in or after the year reaching age 55 (age 50 for qualified public safety employees)
  • Equal periodic payments
  • Total and permanent disability/death
  • Medical expenses [if the amount of unreimbursed medical expenses >7.5% AGI or 10% if under age 65]
  • Paid alternate payee under a QDRO
  • Unemployed individuals for health insurance premiums  (only IRAs)
  • Higher education expenses (only IRAs)
  • First home purchases (only IRAs)
  • IRS levy of the qualified plan
  • Qualified distributions to reservists

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