Originally Posted by Gletam
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.
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of entire account balance option, then, the money you receive is considered taxable income during the year that it is withdrawn.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.