Distributions from retirement plans may be available at events such as retirement, death, disability, severance from employment, or possible financial hardship. When an employee takes a distribution from a retirement plan, the distribution must be reported on his or her federal tax return and is taxable as ordinary income tax based on the employee's current tax rate. Employees under age 59 1/2 may be subject to a 10 percent early withdrawal tax penalty (unless the employee meets certain criteria such as substantially equal payments).
Because Roth contributions are made with after-tax contributions, distributions of Roth contributions are not subject to income taxation (as long as the distribution meets certain criteria). If the Roth distribution doesn't meet certain criteria (for example the first Roth contribution must have been made five years prior to distribution and the employee must be at least 59 1/2), the distribution may be subject to income tax and an additional 10 percent early distribution penalty.
Ohio National is not affiliated with, nor does it endorse or sponsor, any particular prospecting, marketing or selling system.