Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Early Retirement, Defined Benefit Retirement Plan, Tax
Old 09-28-2014, 10:57 AM   #1
Confused about dryer sheets
Join Date: Sep 2014
Posts: 3
Early Retirement, Defined Benefit Retirement Plan, Tax

My company allows distribution from the cash balance plan (a defined benefit plan) if one leaves the company at age as early as 55 and having at least 10 years of service with the company. Does this early distribution incur any tax penalties like if one gets early distribution from a defined contribution plan (like a 401k plan) before one gets 59 1/2 years old? Tried to google it but couldn't find any answer. If you have the answer (and better yet have the references), I'd appreciate.
pogepo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-28-2014, 11:55 AM   #2
rodi's Avatar
Join Date: Apr 2012
Location: San Diego
Posts: 12,080
I have a defined contribution plan (A pension with a lump sum option that I did not contribute to - only the company did.)

I can roll out the lump sum into an IRA with no tax penalty. I would have to pay a 10% penalty to cash it out before 59.5.
I can start the annuity at any time - and pay income tax on the annuity payments - like a pension.
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
rodi is offline   Reply With Quote
Old 09-28-2014, 02:37 PM   #3
Confused about dryer sheets
Join Date: Sep 2014
Posts: 3
Thanks Rodi. My question was about the "defined benefit plan", not the "defined contribution plan". I suspect there is no non-rollover tax penalty for qualified early DBP distribution, but I can't seem finding any official word about it.
pogepo is offline   Reply With Quote
Old 09-28-2014, 03:15 PM   #4
Recycles dryer sheets
robertf57's Avatar
Join Date: Jun 2014
Posts: 337
If you have reached retirement age under your plan and begin your DB payments you will not face IRS penalties.

Sent from my iPhone using Early Retirement Forum
robertf57 is offline   Reply With Quote
Old 09-28-2014, 05:10 PM   #5
Confused about dryer sheets
Join Date: Sep 2014
Posts: 3
Finally found something from IRS. One of the 10% penalty exceptions.

Topic 558 - Additional Tax on Early Distributions from Retirement Plans, Other Than IRAs

There are certain exceptions to this 10% additional tax. The following six exceptions apply to distributions from any qualified retirement plan:

* Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
pogepo is offline   Reply With Quote
Old 09-29-2014, 05:19 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
Join Date: Feb 2006
Location: Washington, DC
Posts: 10,434
Lots of companies and governments have early retirement under DB plans. You will pay income tax on most of the payments but no penalties.
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote

defined benefit plan

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Defined Benefit Plan - Tax Penalty? markwhy Young Dreamers 4 02-08-2011 07:49 AM
Retirement: Defined benefit vs Defined contribution.. please help! M477 FIRE and Money 42 04-03-2010 09:34 AM
Defined benefit plan Scout FIRE and Money 3 11-09-2007 01:27 PM
Defined Benefit Vs. Defined Contribution Pension Spanky FIRE and Money 24 01-18-2006 09:02 AM
Defined Benefit Plan impact on RE mickeyd FIRE and Money 23 01-13-2006 07:55 AM

» Quick Links

All times are GMT -6. The time now is 12:36 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.