Post 55 distribution from Pension Cashout w/ no penalty?

[Guest irr7342]

A friend is telling me that ..........

When I retire, if I am over age 55 (under age 59 1/2) I can take a partial distribution from my pension cashout (prior to rollover to IRA) and the distribution would not qualify for the 10% IRS penalty (just income taxes).

Is this true and if so, what IRC code refers to this?

Thanks guys.

[mbozek]

yup see irc 72t, as long as you are employed by the employer from whose qualified plan you are receiving the distribution.

[maverick]

Also, I believe retirement is not required, you could resign or get downsized (fired), and still be exempt from the 10% early distribution penalty (plus another 3.33% in if you live tax hell, aka Wisconsin).

Maverick

[BPickerCPA]

Retirement IS required.

The rule is, you have to separate from service in the year you attain age 55, or later. If you retire earlier than that you will have to wait until age 59½ for the penalty free money, unless you meet a different exception.

[Guest irr7342]

I've looked through IRS publication 590 but it only speaks to Traditional, SEP, Roth and SIMPLE IRA's. Where can I find more information out about this exception and others?

[Michael Devault]

Look at IRS Publication 575 (Pension and Annuity Income). The "age 55" exception and others are listed there.

(The reason the "age 55" exception is not in Pub. 590 is because it doesn't apply to IRAs and the other plans discussed in that publication.)