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jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3159
Experience:  I've prepared all types of taxes since 1987.
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I will be retiring on January 2nd 2013. The retirement plan

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I will be retiring on January 2nd 2013. The retirement plan where I work is a 401(a) defined benefit plan. I am told that I may take as much as 86,000 dollars up front, but that will of course diminish the monthly payments that I will receive. My question is, what are the tax ramifications? I will be 69 years old on January 2nd when I retire. Will there be a penalty for early distribution of the 86,000? Or, will I just need to pay my regular income tax rate on that amount?

You are correct that there is an additional tax when a retirement distribution is taken prior to age 59 1/2 that will not apply to the amount you take at age 69.

You will need to pay regular income tax; but will not have to pay the additional ten percent for an early distribution on the amount you take out of the plan.

Please ask if you need clarification or more information.
Thank you.

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