will i have to pay penalty on my company pension not 401k if im 56 years old?
John, If you are thinking of beginning withdrawals from your pension plan, the tax code does charge a 10% penalty for certain withdrawals made before age 59 1/2. However, there are several exceptions to this rule that may apply in your case. First since this is a defiend benefit pension plan, if you elect to take your withdrawals in monthly annuitized or installments payments over your remanining life expectancy, the 10% penalty should be waived. Alternatively if you terminated from your company AFTER you turned age 55, you may be eligible for a waiver from the 10% penalty even for lump-sum cash withdrawals. I would advise you to seek tax counsel to clarify your individual circumstances.
Hi John, Sorry to hear about the loss of employment. Your employer should have vesting requirements that have to be met in order to collect a defined benefit pension. Assuming you meet that requirement there would not be any tax penalties just because of your age. The pension you receive will be taxed as ordinary income. Check with the employer to see what payout options you have. Good luck and feel free to contact me with additional questions.
Hi again, there are different withdrawal rules for IRAs, 401(k) and defined benefit plans. The age 59.5 applies to IRAs, for 401(k) the age is 55. For your DB plan you have to have a certain amount of years combined with a minimum age requirement typically 55. Since you are 56, severed from employment and have 10 years of service you should ask the company to calculate your monthly benefit. If you have a lump sum option be careful what you do with it because different rules apply depending on what you do with the lump sum.