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Question 19 — Penalty Taxes for Withdrawals

Q. My public safety officer client just informed me he has retired at age 50 and plans to take withdrawals from his individual retirement account without a 10% penalty tax. He has been told that the 10% penalty tax is waived for public safe officers at age 50 or over. Is this correct?

A. Code Section 72(t)(10)(A) specifies that the penalty tax, is, indeed, waived as early as age 50 but only  for governmental defined benefit plans. The rule is that a public safety officer severing employment in the same year as the 50th birthday or later escapes the 10% extra tax. This substitutes, for government employees who participate in the government DB plan,  “age 50” for the “age 55” rule that applies to everyone else.