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What Is A Distribution From A Retirement Plan

This excerpt explains what distributions mean in retirement plans.

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What Is A Distribution From A Retirement Plan

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  1. What Is A Distribution From A Retirement Plan?

  2. Retirement Distribution Defined A distribution from a retirement plan is equal to withdrawing funds. Whenever you take money out of your retirement plan, it becomes a distribution. Take money out may also be referred to as a withdrawal. The two terms can be considered synonymous.

  3. Different Types of Distributions There are several different types of retirement plan distributions. • Normal distributions • Early distribution • Required minimum distribution • Qualified distribution • Periodic distribution • Lump sum distribution • Rollover distributions

  4. Distribution Taxes And Penalties You already know what is a distribution from a retirement plan. What you may not know is that a retirement plan often carries special tax advantages and limitations. The rules on limitations often relate to the age at which you take a distribution. To encourage compliance with these rules, the IRS levies penalties and taxes on some distributions.

  5. Tips For Taking Distributions From Your Retirement Plan What is a distribution from a retirement plan? You know the answer, and now, let’s take a look at a few tips for taking distributions from your retirement plan. • Each type of retirement plan has its own distribution requirements. Review the guidelines for your 401(k), IRA, or pension before taking money out. • Most retirement distributions are considered taxable income. This means withdrawals can increase your tax bill for the years. • A distribution today can reduce how long your money lasts tomorrow, so think about your broader retirement income strategy.

  6. Bottom Line Distributions are withdrawals of funds from retirement accounts. Many rules govern distributions and infractions may involve paying penalties and taxes. The rules are different for different types of accounts, but generally withdrawing money from a retirement account before age 59.5 will make it subject to some kind of added cost.

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