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

Jul 30, 2019

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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.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

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

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