A:

Your options depend on the type of penalty that would apply.

If the penalty is a surrender charge or another penalty that would apply to an annuity or insurance product, you may want to consider leaving the assets in the plan until the time when the penalty will no longer apply. These penalties are not usually IRS-assessed penalties; rather, they are assessed by the company offering the product.

If the penalty is the 10% early-distribution penalty assessed by the IRS when an individual makes withdrawals before reaching age 59.5, then you may avoid that penalty by keeping the assets in the plan. If your plan is a 403(b) account, you may transfer the balance to a 403(b) account at another financial institution or roll over the amount to a Traditional IRA. These options are not taxable, and you will not be subject to the 10% penalty.

To learn more about this topic, read Taking Penalty-Free Withdrawals From Your IRA.


This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. How does a forward contract differ from a call option?

    Find out more about forward contracts, call options, the mechanics of these financial instruments and the difference between ...
  2. For what types of financial instruments would I want to calculate the present value ...

    Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ...
  3. What exact information is included in the interest rate when calculating the present ...

    Find out what the interest rate of an annuity means in the context of the present value calculation, including an explanation ...
  4. How do you calculate a present value of annuity using Excel?

    Find out how to use Microsoft Excel to calculate the present value of a fixed annuity, including proper setup and an example ...
RELATED TERMS
  1. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  2. Strike Width

    The difference between the strike price of an option and the ...
  3. Inverse Transaction

    A transaction that can cancel out a forward contract that has ...
  4. Reference Equity

    The underlying equity that an investor is seeking price movement ...
  5. Boundary Conditions

    The maximum and minimum values used to indicate where the price ...
  6. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...

You May Also Like

Related Articles
  1. Options & Futures

    How does a forward contract differ from ...

  2. Stock Analysis

    General Electric Returns Vs The Dow ...

  3. Options & Futures

    Tesla Stock Too Expensive? Trade Tesla ...

  4. Options & Futures

    Stock Options To Trade On Intraday Momentum ...

  5. Retirement

    How to Battle Inflation During Retirement

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!