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Old 02-12-2019, 09:37 AM
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Penalty?

I retired at age 50 from a state agency and went to work at a private company. I receive a monthly check from my retirement. Taxes are withheld and I get a 1099-R. Tax software says I owe a early withdrawal penalty on my retirement. Is this correct? If so, will this occur every year until I?m 59 1/2?



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Old 02-16-2019, 11:48 AM
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I retired at age 50 from a state agency and went to work at a private company. I receive a monthly check from my retirement. Taxes are withheld and I get a 1099-R. Tax software says I owe a early withdrawal penalty on my retirement. Is this correct?===========>>>

Correct;most withdrawals are subject to income taxes, as well as penalties if you're under age 59 1/2. Regardless of the tax status of a withdrawal,

If so, will this occur every year until I?m 59 1/2?===========>> a Form 1099-R must be completed by the IRA custodian each year that a withdrawal occurs early withdrawals must be included in taxable income for the year you made the contribution.; you need to pay penalties on the tax return; Suppose you are age 50 and say, you take $10K from your traditional IRA. Then, the $10K shows up as income on the first page of your tax return , I mean, on line 15a and 15b on your 1040.This income is included along with your other sources of income to determine the total amount of tax owed for the year when you withdrew the money.The amount of tax owed on the $10K will depend on your income tax rate, which is determined by your total income and deductions.In addition to the tax on the $10K early withdrawal, a 10% penalty tax is assessed on the withdrawal.In this scenario, that would be an additional $1K of tax owed in addition to your ordinary income taxes.
If you had at least $1K more in taxes withheld during the year than what you would need to cover your normal tax bill, then, despite the IRA early withdrawal, no additional taxes would be owed.



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Old 02-16-2019, 12:35 PM
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Thanks, guess I?m stuck.

Thank you for your reply. I always understood that that if you took an early withdrawal from say a 401k it was subject to a penalty but since this was my Employees Retirement System state pension,and not a IRA or 401k, I thought it would be like regular income. I guess I will have the penalty every year for 6 or 7 years because I am currently 53. Thank you again for your help.


Last edited by Gletam : 02-16-2019 at 12:37 PM.


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Old 02-16-2019, 11:24 PM
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Quote:
Originally Posted by Gletam View Post
Thank you for your reply. I always understood that that if you took an early withdrawal from say a 401k it was subject to a penalty but since this was my Employees Retirement System state pension,and not a IRA or 401k, I thought it would be like regular income. I guess I will have the penalty every year for 6 or 7 years because I am currently 53. Thank you again for your help.
Agreed;
OK, different states in the USA are governed by differentlaws. However in general, there are some rules. if you select
Lump-sum payment of entire account balance option, then, the money you receive is considered taxable income during the year that it is withdrawn. In addition, if you withdraw your money before age 59 1/2, there may be a 10% early withdrawal penalty. If you end your state service after age 55 and decide to take a lump-sum benefit, you are not subject to the 10% penalty. However, as you said, aslongas you select Partial lump sum/partial monthly benefits, then, you can elect to receive a partial lump sum payment and collect monthly benefits on the remaining value of your account. You can determine how much you would like to receive under each payout option. If you select this option, you must immediately collect monthly benefits on the remaining value of your account after taking the partial withdrawal. You can begin to collect monthly benefits any time after you reach age 55. This monthly lifetime income is not subject to the IRS 10% penalty. If you are not age 55 when you end your state service, you may keep your money in the Unclassified Plan, continue to invest your account, and begin to collect your monthly benefits any time after you reach age 55.



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Old 02-17-2019, 07:13 AM
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Ok

Thank you once again.



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