Code 2 is in box 7 of my 1099-R. What does "early distribution, exception applies" mean in the code explanation? I was 55 when I retired.

[rwilson79]

I thought my retirement was a normal distribution, which is code 7.

[ChristinaS · Accepted solution]

Its not "normal" because you are not 59 1/2. Normal simply means 59 1/2.

However, Box 2 means you are not paying the 10% penalty either way. So, you are not penalized for not being 59 1/2 regardless. A "7' wouldn't be any better than a "2".

[ChristinaS]

Because you separated from service at 55, you are not penalized for not being 59 1/2. This meets the following 10% penalty exception:
Qualified retirement plan distributions you receive after separation from service when the separation from service occurs in or after the year you reach age 55 (age 50 for qualified public safety employees).
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i5329/ch02.html">https://www.irs.gov/instructions/i5329/ch02.html</...>

[rwilson79]

Thank you.

[ChristinaS]

No problem!

[bamagolfers2]

Question to both of you guys...I have the same issue but how do I get the s/w to not add 10%?  Fill out 5329?