403(b) Withdrawals at Age 55

Q: My client is severing employment on Jan. 15, 2017, but won't be age 55 until August 2017. Does that mean his withdrawals from the 403(b) plan will be subject to the 10% penalty tax?

A: No, since the requirement to avoid the 10% penalty tax specifies that the penalty is waived for withdrawals taken when severance of employment with this employer takes place in the same YEAR as the 55th birthday (or later).

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