Early Withdrawal from Retirement Plans
Saturday July 2, 2005
If you are thinking about withdrawing money from your retirement plan and you are under 59 and a half years old, you should think twice before withdrawing that money. First of all, you will need to include that withdrawal as part of your taxable income. Secondly, you will have to pay an additional 10% tax on the early withdrawal. There are several exceptions to the early distribution penalty, so find out if you qualify for an exception before you withdraw the money.
how do i find out if im qulified
Simply go to my article on the Early Distribution Penalty and read about the exemptions for the 10% early distribution tax penalty.
I am about to leave the country after living here on a work visa for 6 years. For the last 4 years I contributed to an ORP that I thought I could transfer to an overseas account when I finally left… however I’m told that this will not be able to happen and I am forced to leave the ORP where it is until retirement or withdraw. Is there a smart way to withdraw? Do I have them withhold state and federal taxes? or should I simply withdraw it all and have a professional work it out in my own country when I’m back?
RK, you’ll need to contact your ORP plan administrator for additional details. It sounds like this is a type of pension or other group retirement plan sponsored by your employer. Such plans usually have similar rules as 401k plans, but there are important differences. You may be able to rollover the funds into an IRA. That will enable you to have control over where your money is invested and would preserve the tax deferral feature of your savings.
At the end you might be probably better off with 10% penalty than having your money pay for their bonuses.
I need an early withdrawal from IRA and don’t qualify for any exceptions. I know I will owe taxes on earnings, but can I ever recover the additional 10% penalty and how?