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Archive for May, 2009

The taxes on a retirement plan will be deferred until you take your money out, at which time it will be taxed as ordinary income. But if you withdraw funds from a retirement account before the age of 59, you will pay a 10 percent federal penalty on any amount withdrawn, as well as a state income tax penalty. You will also pay ordinary income tax on the money. With a SIMPLE, it works the same way after the first two years. But if you take out the money within the first two years you participate in the plan, an early withdrawal tax of 25 percent will apply.
However, there are exceptions.