| Understanding retirement distribution guidelines | |
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When can you withdraw distributions?
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To take distributions from most 401(k), 403(b), 457(b) and profit- sharing plans, you generally must leave your job (separate from service) or reach age 59 ½.
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When will you face a penalty for withdrawing distributions?
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A 10% IRS penalty may apply to taking early distributions from most retirement plans. Note: 457(b) plans don't carry this penalty.
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How are distributions taxed?
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Distributions are generally taxable as income. However, you can take tax-free distributions from a Roth IRA if you've participated in the plan for at least five years and reached age 59 ½.
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What is the age you’re legally required to withdraw distributions?
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Most plans require that you start taking required minimum distributions (RMDs) by April 1 of the year following the calendar year you reach age 72, regardless of whether you remain employed. These distributions are based on your life expectancy and your account balance at the end of the previous year. RMDs are usually taxable, and there is a 50% penalty on the amount not taken if you skip them or take less than the required amount.
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