What are the tax implications of taking a full distribution of a pension at the age of 30?

What are the tax implications of taking a full distribution of a pension at the age of 30?

by David S. Markle, CPA | Jul 30, 2019

I am 30 years old. I have an old pension account with a previous employer that has about $5,000 in it. I have the option to roll it over, leave it, or take a full distribution. What would the taxes look like if I were to take a full distribution of the $5,000 at my age? 

I would recommend either leaving the pension where it is (depending on the available investments) or rolling over the account to an IRA. That $5,000 invested today could grow to around $200,000 in 37 years (full retirement age) if it earned 10.49%. 

If you decide to take the distribution, it will be subject to your marginal income tax rate plus an additional 10% early withdraw penalty for being under 59 1/2.

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Answered by: David S. Markle, CPA, is a financial planner with Markle Wealth Management in Danielsville, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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