OK, tax time again. Today we’re talking about how to withdraw money from a retirement plan without getting stung by the 10% penalty tax.
We never know when an emergency can happen, so knowing how to dip into a retirement fund without losing 10% or more is worth knowing.
Without going into the details, then, here’s a quick overview of the things that are exempt from the penalty tax:
- Medical Expenses (if those expenses exceed 7.5% of your income)
- Withdrawals After Leaving Public Service (above age 50 or 55, depending on the service)
- Federal Tax Levy Payments
- Withdrawals Made By Military Reservists
- Withdrawals Following Disability (classed as a disability that leaves you unable to work)
- A Domestic Relations Order (issued by a court during divorce proceedings)
There’s also one more called an SEPP program but it’s too complicated to go into here. Basically, it’s a scheme that allows annual payments.
For more detailed info, check out this article from Bill Bischoff at SmartMoney.com, or talk to a professional financial advisor.