Retirement Topics - Distributions (when, how much)
When may a participant take money from a qualified plan?
Participants should consult their summary plan description for the specific events or times they are entitled to receive benefits from the plan. The plan may require a reasonable period of time after the event occurs to calculate the benefit and determine the payment schedule, or to value the account balance and to liquidate any investments in which the account is invested.
The following are a few general rules about possible distribution events from different types of plans:
Defined benefit plan or a money purchase plan: The plan will set a normal retirement age, which is generally when the participant will be eligible to receive his or her vested accrued benefit. These types of plans may permit earlier payments, either by paying:
- early retirement benefits, or
- benefits when the participant terminates employment, is disabled or dies.
401(k) plan: The plan may permit distribution of a participant’s elective deferrals when he or she:
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terminates employment,
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retires,
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dies,
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becomes disabled,
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reaches age 59½, or
Profit-sharing plan or a stock bonus plan: The plan may permit distributions of a participant’s vested accrued benefit after he or she:
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terminates employment,
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becomes disabled,
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dies,
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reaches a specific age,a stated event, such as hardship, or
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after a specific number of years have elapsed (no less than 2).
When can an individual withdraw IRA assets?
You can withdraw your IRA assets at any time. However, as with distributions from other plans, a 10% additional tax generally applies to IRA withdrawals before age 59½. Withdrawals of your own IRA contributions for a year before the due date for filing your return (to remove excess contributions, for example) are not subject to the 10% additional tax. Also, Roth IRA contributions (not including earnings) may generally be withdrawn without owing additional taxes.
When are distributions required?
You generally have to start taking withdrawals from your retirement plan or IRA once you reach age 70½. See Retirement Topics - Required Minimum Distributions (RMDs).
Additional Resources:
- Publication 575, Pension and Annuity Income
- Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
- Individual Retirement Arrangements (IRAs)
- Retirement Topics - Required Minimum Distributions (RMDs)
