Will I be able to withdraw from my Pension earlier without being penalized?

Hi Isnow,

If you refer to your company pension plan, you should be able to withdraw without paying any early withdrawal penalty (you still have to pay income taxes). Here's an excerpt from the Motley Fool's article: Escape the Early Withdrawal Penalty

IRS Publication 575, "Pension and Annuity Income," tells us that an early distribution penalty will not apply when withdrawals are made "(f)rom a qualified retirement (other than an IRA) after your separation from service in or after the year in which you reached age 55." Therefore, when you leave your job in or after the year of your 55th birthday, you may take money from your employer's retirement plan(s) and only have to worry about paying ordinary income taxes.

If you are withdrawing from 401(k) or IRA, you have to wait until you turn 59 and a half (very close to the time you're going to need the fund) to avoid early withdrawal penalty. Again, you'll have to pay income taxes on your withdrawal.

Answered by Pinyo at Jul 16, 2009 07:49 PM

The 55 rule applies to 401(k) as well, i.e. if you are 55 or older at separation from company the 401(k) withdrawals are penalty free.

As I'll keep mentioning, see Fairmark to understand your marginal tax rate. You may want to use an IRA conversion to Roth to 'top off' your tax bracket when 2010 comes.

Answered by JoeTaxpayer at Jul 16, 2009 08:24 PM