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Is there a penalty for receiving an early of a pension at age 56? I terminated at age 40 and received lump sum this year at age 56.

It was a standard, company pension and I was eligible to start receiving monthly benefits because I was over 55 1/2.  I left this employer in 2000 and received the lump sum in 2017.
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dmertz
Level 15

Is there a penalty for receiving an early of a pension at age 56? I terminated at age 40 and received lump sum this year at age 56.

You do not qualify for the age-55 exception because you separated from service before the year that you reached age 55.

You do not qualify for the exception for a series of substantially equal periodic payments because you received a lump-sum buy-out of your pension, not a series of payments for life.

Other penalty exceptions for distributions from a qualified retirement plan are listed on the following IRS web page, but are less common than the ones listed above that you already do not qualify for:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...



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3 Replies

Is there a penalty for receiving an early of a pension at age 56? I terminated at age 40 and received lump sum this year at age 56.

What is the code in box 7 of the Form 1099-R?

Is there a penalty for receiving an early of a pension at age 56? I terminated at age 40 and received lump sum this year at age 56.

The code in box 7 is 1.
dmertz
Level 15

Is there a penalty for receiving an early of a pension at age 56? I terminated at age 40 and received lump sum this year at age 56.

You do not qualify for the age-55 exception because you separated from service before the year that you reached age 55.

You do not qualify for the exception for a series of substantially equal periodic payments because you received a lump-sum buy-out of your pension, not a series of payments for life.

Other penalty exceptions for distributions from a qualified retirement plan are listed on the following IRS web page, but are less common than the ones listed above that you already do not qualify for:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...



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