What excise tax is imposed on the early withdrawal from retirement plans and how can it be avoided?
Distributions from qualified retirement plans are subject to an excise tax if they are made before the participant reaches the age of 59 1/2. The tax is in addition to the regular income tax. The excise tax does not apply to the following distributions: Distributions upon the death or disability of the participant, Distributions after separation from service that are part of a series of substantially equal periodic payments over the life of the participant, Distributions after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55, Distributions not exceeding deductible medical expenses. Early distributions from individual retirement accounts (IRAs) are also subject to the excise tax. The exceptions are similar to those applicable to other retirement accounts except that early retirement and medical expense exceptions do not apply. The law has recently broadened the scope of exceptions applicable to (IRAs) to include
