Tax question about penalties for early withdrawal on Roth 403b?

[Homeby5]

I retired from company after the age of 55 but before the age of 59 1/2. I have had the Roth 403b money market account for over 10 years. I want to pull $30k from my ROTH 403b money market account.
It is my understanding that the "Age of 55" rule allows me to pull money from my Roth 403b without any penalty or having to pay taxes. Assuming my employer has not made any specifications preventing the "age of 55 rule"....is that correct?

If not...and the age "age of 55" rule does not apply to Roth 403b accounts, shouldn't my penalty be subject to 10% of the earnings only?

Example...if my money market made only 1% interest, does that mean I would have to pay a penalty of $30? (.01 x 30,000 x .1). Is that correct? If not...how is "earnings" formulated?

Thanks

[ColeenD3]

403(b) Early Withdrawal Penalties

As mentioned, qualified distributions are tax-free. To count as a qualified distribution, you have to be at least 59.5 when withdrawing money from your account. In addition, your account has to have been open for a minimum of five years. If you don’t meet either of those conditions, a 10% early withdrawal penalty would apply to distributions.

You may qualify for an exception under certain circumstances. For instance, you could avoid the penalty on an early withdrawal if:

• You separate from service during, or after, the year you turned 55
• You separate from service before age 55 but take substantially equal payments for a minimum of five years or age 59.5, whichever is later
• You become totally and permanently disabled

Roth 403 (b)

[Homeby5]

Thanks.

Can you provide a link to the IRS website backing up what you wrote? The reason I ask is because the Fund manager of my money is trying to withhold 10% for tax purposes...not a penalty. He claims the age of 55 rule does not apply to Roth accounts. 

But again...even if the age of 55 rule doesn't not apply,  shouldn't you only pay %10 penalty on the EARNINGS? 

[dmertz]

The age-55 rule only eliminates the 10% early-distribution penalty.  It does on eliminate that income tax on the earnings.  The earnings are income-tax free only if you have reached age 59½ or are disabled (or if you roll the earnings over to another Roth account).

Because the distribution is eligible for rollover, the fund manager is required to withhold 20% of the taxable amount of the distribution (the earnings are the taxable portion) for income taxes.  This has nothing to do with the 10% early-distribution penalty.

Prior to making the distribution your 403(b) plan administrator was required to give you information explaining these tax consequences unless you waived that requirement.

The tax code establishes the rules for qualified distributions (tax free distribution of earnings) in from a designated Roth account in a qualified retirement plan like a 403(b) in section 402A(d)(2).  This section refers to section 408A(d)(2)(A) (without regard to clause (iv) thereof):

(A)In general

The term “qualified distribution” means any payment or distribution—
(i)made on or after the date on which the individual attains age 59½,
(ii)made to a beneficiary (or to the estate of the individual) on or after the death of the individual,
(iii)attributable to the individual’s being disabled (within the meaning of section 72(m)(7))

The age-55 rule is defined in section 72(t)(2)(A) of the tax code where it describes exceptions to the early-distribution penalty.  It has nothing to do with determining whether the earnings are subject to income tax.

[Homeby5]

Thanks