tax deferred annuity
I have client who is a retired teacher in the state of Michigan and has a 403b in a tax deferred annuity. She is 55 years old. Does anyone know if she can withdraw some money and avoid the 10% IRS penalty? I know some employers allow it, but I have never dealt with it in this situation before.
Thanks
Permalink Submitted by Alan Spross on Wed, 2011-04-27 20:35
If she is retired there should be no problem taking distributions, but the age 55 penalty exception only applies to those separated from service in the year they reached 55 or later. Sounds like she retired prior to age 55 and therefore this exception would not apply. There are other exceptions to the penalty in Sec 72t such as disability or high medical costs.
If none of these work, she could do a direct rollover to an IRA and start a 72t plan under which she would have to take distributions for at least 5 years based on her life expectancy, but the penalty would be waived.