| Sargent & Lundy Savings Investment Plan |
| PAYING THE PENALTY |
The following excerpts are from an article in the March 23, 1998 "Newsweek". The opinions of the author, Jane Bryant Quinn, may or may not reflect those of the SIP Committee. Question: Everyone talks about the 10 percent tax penalty for withdrawing funds early from a retirement plan, such as a 401(k) or Individual Retirement Account. Exactly how is this 10 percent assessed? I suspect that a lot of people forget the penalty because they don't see it mentioned on their tax return. But believe me, the IRS will track you down. If you didn't pay on time, you'll owe the penalty plus interest. The paper trail to your mailbox starts with your plan's trustee, who tells the IRS every time it distributes money. A code number on the reporting form indicates whether you might owe a penalty or not. If you owe it, you should have attached Form 5329 to your return, along with your payment. If there's no 5329, the IRS will inquire. You're normally penalized on withdrawals made before you reach 59-1/2. The damage comes to 10 percent of the taxable money you withdraw. But there are exceptions. No penalty is assessed on any early withdrawals that your plan allows if: you're disabled; you're dead; you need money for uninsured medical expenses that exceed 7.5 percent of your adjusted gross income; you've gotten unemployment benefits for 12 consecutive weeks and need money for medical-insurance premiums (this applies to IRAs only); you've left your job and are at least 55 (for all plans except IRAs); you've set up an equal-payment schedule for withdrawing the money over the rest of your life, or - new in 1998 and for IRAs only - you're paying for higher education or using up to $10,000 to buy a first house. If any of these exceptions apply, you're off the hook. |
This page updated on 3/19/98