Question

At age 55, Arianna separated from service with her employer. She rolled over $25,000, the entire balance of her 401(k), into an IRA. Then, in December of the same year, Arianna had to take $1,550 out of this new IRA in order to pay some bills. How much of her distributions are subject to the early distribution penalty

Answer 1

The amount of her distributions that is subject to the early distribution penalty is $1,550.

What is distribution penalty?

Distributions means the qualified retirement plan that are subject to federal income tax, but a penalty will be imposed when there is failure to file the distributions to the authority.

Usually, a distribution from IRA is subject to 10% penalty if the same is made before reaching the age of 59 and one-half, unless, it is made for qualified purposes.

In conclusion, the amount of her distributions that is subject to the early distribution penalty is $1,550.

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