# Early withdrawal from a pension plan **URL:** \ **Category:** Factual Questions\ **Created:** [May 4, 2018, 7:59pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597 "2018-05-04T19:59:39Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![obbn](https://avatars.discourse-cdn.com/v4/letter/o/d6d6ee/32.png) [@obbn](https://boards.straightdope.com/u/obbn)\ **Post date:** [May 4, 2018, 7:59pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/1 "2018-05-04T19:59:39Z")
Hello Everyone, I’m hoping there’s someone here with knowledge of pension plans. I worked for ten years at AT&T until becoming 100% disabled due to a workplace accident. I have a small pension plan with them, around $30,000 in value. Fast forward to today, I am facing some financial hardships that include some medical bills. Since the pension I have with AT&T is so small I’m thinking it might be beneficial to cash it out of possible. Reading on the internet I’m left completely confused. I’m only 52, so that precluded me from withdrawing, however there seems to be a provision in place that if you are fully disabled you can withdraw from a pension plan at any time. I’ve called the plan administrator, but they weren’t able to give me the information over the phone. Instead they are mailing me the information, I should receive it in two weeks. So, the question is, am I at 52 and 100% disabled allowed to withdraw my pension and will there be a penalty? Oh, this is not my only retirement vehicle. I have others, But it id’s the smallest and won’t pay much when I would be old enough for monthly benefits. So, I think if I can withdrawal it, the funds would be better off to use now. Thanks in advance. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [May 4, 2018, 8:05pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/2 "2018-05-04T20:05:21Z")
You might be liable for income taxes and taking it as a lump sum might kick you into a higher bracket, so consider that aspect. I too had a small pension of $29,000 at age 52. Now, at 69 it is worth $77,000. ---
**Author:** ![Procrustus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/procrustus/32/2994_2.png) [@Procrustus](https://boards.straightdope.com/u/Procrustus)\ **Post date:** [May 4, 2018, 8:09pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/3 "2018-05-04T20:09:50Z")
I don’t know if a pension would be covered by the same rules that govern an IRA, but this is what I found on an [IRS website](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions). > [@](#): > > The distribution will NOT be subject to the 10% additional early distribution tax in the following circumstances: > > * * * > > Disability > total and permanent disability of the participant/IRA owner ---
**Author:** ![tim-n-va](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tim-n-va/32/3001_2.png) [@tim-n-va](https://boards.straightdope.com/u/tim-n-va)\ **Post date:** [May 4, 2018, 8:16pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/4 "2018-05-04T20:16:20Z")
There are so many variables that retirement/financial advice is difficult. IRAs and 401Ks have very similar but not identical rules. Plus these are subject to change. If you have a 401K and can’t do what you want, check the rules for an IRA. You might be able to roll the company plan into an IRA and have more flexibility. In either case it looks like you can avoid the penalty for an early withdrawal but still have the normal taxes - if any. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [May 4, 2018, 8:26pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/5 "2018-05-04T20:26:31Z")
You should consult with a tax accountant or attorney but, as I understand it, if are permanently and completely disabled, you do not have to pay a tax penalty on early withdrawal of the retirement plan. See pp. 32-33 of the pdf below. From that source: > [@](#): > > You are considered disabled if you can furnish proof that you can’t do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or be of a long, continued, or indefinite duration. > **[p575.pdf](https://www.irs.gov/pub/irs-pdf/p575.pdf)** > > 1629.66 KB ---
**Author:** ![glowacks](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/glowacks/32/5548_2.png) [@glowacks](https://boards.straightdope.com/u/glowacks)\ **Post date:** [May 4, 2018, 11:37pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/6 "2018-05-04T23:37:32Z")
I assume you’re from the USA. As a general rule there is a 10% additional income tax on any money withdrawn from a retirement plan before the year you turn 59.5. This includes probably anything that you would be told was a retirement plan unless you were straight-up lied to and had your money taken for no reason. There is a rule specifically allowing for distributions early if the person receiving them is disabled under the meaning of code section 72(m)(7): > [@IRcode section 72(m)(7)](#): > > For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require. ---
**Author:** ![glowacks](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/glowacks/32/5548_2.png) [@glowacks](https://boards.straightdope.com/u/glowacks)\ **Post date:** [May 4, 2018, 11:43pm UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/7 "2018-05-04T23:43:26Z")
Hit the wrong button, meant to go advanced and hit quick reply… …[specifically allowing distributions] _without penalty_ [if the person…] Note that this doesn’t exempt them from regular income tax, so you should have some tax withheld from any distributions. Your state may or may not tax it as well. ---
**Author:** ![obbn](https://avatars.discourse-cdn.com/v4/letter/o/d6d6ee/32.png) [@obbn](https://boards.straightdope.com/u/obbn)\ **Post date:** [May 5, 2018, 12:58am UTC](https://boards.straightdope.com/t/early-withdrawal-from-a-pension-plan/813597/8 "2018-05-05T00:58:00Z")
> [@glowacks](#): > > I assume you’re from the USA. As a general rule there is a 10% additional income tax on any money withdrawn from a retirement plan before the year you turn 59.5. This includes probably anything that you would be told was a retirement plan unless you were straight-up lied to and had your money taken for no reason. There is a rule specifically allowing for distributions early if the person receiving them is disabled under the meaning of code section 72(m)(7): Thanks everyone. I’m certainly disabled. I have a 100% disability and receive Social Security Disability. I’m aware that the funds will be taxed, I’m hoping to avoid the penalty.