This is the forth in a multi-part series by Christopher M. Moore. Read Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY),  Part 2 (Retirement Plan Interests as Community Property) and Part 3 (Taxation of Retirement Plan Withdrawals) Planning Opportunities The two common opportunities for planning afforded by Code §72(t) are those relating to distribution pursuant to a QDRO and periodic distributions from an IRA. Any amount may be distributed in a lump sum directly from a qualified retirement plan (other than an IRA) to the non-employee spouse before age 59½, without imposition of the penalty tax. Where an IRA is involved, the benefits may still be […]

This is the third in a multi-part series by Christopher M. Moore. Read Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY) and Part 2 (Retirement Plan Interests as Community Property) The rules governing the taxation of retirement plan withdrawals may be summarized as follows: All such withdrawals are ordinary income for federal and state income tax purposes. An “additional” or penalty tax of 10 percent applies to distributions from qualified retirement plans to recipients under age 59½. Internal Revenue Code §72(t). The combined state and federal income tax, taking into account the deductibility of state income tax on the […]

This is the second in a multi-part series byChristopher M. Moore. Read Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY) here. Retirement plan interests are community property to the extent that the benefits are earned or accrued during the marriage.There are two judicially-approved ways to divide the community interest in a retirement plan. The first method is to reserve jurisdiction over the plan interest and divide each payment between the spouses based on the respective community and separate interests, as and when each payment is received. The second is to value the plan interest […]