Public employee retirement early withdrawal without penalty?

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Anonymous
Anonymous Member Posts: 1,376
edited June 2017 in Stage IV/Metastatic Breast Cancer ONLY
Public employee retirement early withdrawal without penalty?
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  • ShetlandPony
    ShetlandPony Member Posts: 4,924
    edited May 2017

    If you were formerly a public employee, for example worked for a city, and have cashed in your retirement account before normal retirement age, please tell me exactly what you had to do to accomplish this and avoid the IRS penalty for early withdrawal. As I understand it, if you take the money early, you pay both taxes and a penalty, but the IRS could waive the penalty if you are disabled. Is simply being diagnosed with metastatic breast cancer and not being currently employed enough? Or do you have to be very unwell? Statistics would say I am not likely to be alive or well at retirement age. I just want to cash in my small account and do some things that will make my family and myself happy right now. Does the doctor need to write a letter, and what should it say? Are there forms I need to fill out? I also read something about taking equal disbursements over your life expectancy as an alternative way of avoiding the penalty. How does this work? Please know that my eyes glaze over the moment the topic of financial planning comes up. I'm not up for research about this. Hoping there is somebody who can just tell me what steps to take.

    (P.S. Not a 401K. And the administration of the retirement system can't/won't answer questions about exactly how a person with a terminal illness can avoid the penalty. They say to call the IRS. We all know how helpful that would be. Not.)

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  • susan_02143
    susan_02143 Member Posts: 7,209
    edited May 2017

    I actually find IRS employees to be very helpful, so don't completely discount the idea of calling them. The easiest way to "prove" disability is to apply for Federal disability benefits. Once approved, you will not be obligated to pay the 10% tax surcharge on the amount you withdraw. Only the IRS can tell you other ways to prove that you qualify for withdrawal before the prescribed age. When I search for "IRS prove disability for early retirement saving withdrawal" I get a large number of hits with useful information

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  • NotHerToo
    NotHerToo Member Posts: 58
    edited May 2017

    I'm guessing it varies from state to state, but my friend took early medical retirement under the exact circumstances. It was actually more monthly than her benefits would have been had she waited to actual retirement age. Of course she did not take the lump sum, so I don't know what/if penalties would apply. She consulted with her public retirement representative before she made any decisions. They know more about your specific benefits than the IRS would. I hope you enjoy the benefits for many years....

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  • ShetlandPony
    ShetlandPony Member Posts: 4,924
    edited May 2017

    Thanks for the replies. To clarify:

    I am not interested in applying for federal disability benefits.

    I would not be retiring early or retiring for health reasons or retiring at all as I have not worked for some time.

    The penalty I think I should be able to have waived is an IRS penalty, so I don't think the rules would vary by state.

    I just want to access my money that is in my public employees retirement account now, as a lump sum, without paying a penalty. I can't see myself working, and I can't count on being here at retirement age. I want to find out how a stage iv bc patient qualifies to have the penalty waived, and what the steps in the process are.

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  • ShetlandPony
    ShetlandPony Member Posts: 4,924
    edited May 2017

    Bump.

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  • Fitztwins
    Fitztwins Member Posts: 7,969
    edited May 2017

    Can you call the human resources department? I am hoping to tap in into my retirement for my boys college funds, (since I doubt I will live long enough to draw)

    Anxious to find out what you do.

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  • ShetlandPony
    ShetlandPony Member Posts: 4,924
    edited June 2017

    Hi, Fitztwins. So I called HR, and they refer me back to the retirement system and/or the IRS. I found form 5329 and instructions, but I still do not know exactly what to do. I need some hand-holding. I called a tax preparer who I did business with once, and they said they had no experience with this. Their tone of voice told me they were suspicious of me. Surely there are people who have dealt with this before who could help me, but how to find them?

    If any not-stage iv people have input, please PM or post. Should I re-post this on a different forum?

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  • Zillsnot4me
    Zillsnot4me Member Posts: 2,687
    edited June 2017

    There is the employment insurance section. I think at one time there was a couple of experts onthere. You could try it there. Good luck!

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  • Icietla
    Icietla Member Posts: 1,265
    edited June 2017

    See pages 1 and 2 ("Deemed IRAs") and pages 24 and 25 ("Exceptions") of IRS Pub. 590B. You do not have to be on Disability Benefits to be Totally and Permanently Disabled. As example only, I am Totally and Permanently Disabled, but I do not qualify for Disability Benefits.

    https://community.breastcancer.org/forum/113/topics/845158?page=1#post_4740068

    https://www.irs.gov/pub/irs-pdf/p590b.pdf

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  • Icietla
    Icietla Member Posts: 1,265
    edited June 2017

    Here is a Tax Year 2017 Tax Brackets "cheat sheet" for handy reference (scroll down to the brown section). If you are going to take a taxable distribution/s, you can figure how much difference/room you have between your expected other taxable income and the start of the next higher tax bracket, so you can figure how much you could take in taxable distributions without being bumped into a higher tax bracket.

    http://www.jazzwealth.com/uploads/8/0/4/2/80420910/2017_contribution_limits.pdf


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  • Icietla
    Icietla Member Posts: 1,265
    edited June 2017

    ShetlandPony, you should consult with a Tax Professional -- a CPA or a Tax Attorney.

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  • bigbhome
    bigbhome Member Posts: 840
    edited June 2017

    Shetland - I had a thought about your problem. There is an asset protection attorney in Louisville, KY, who helped me during great recession. His partner is a tax attorney who is well versed in all these issues. Jamie Hargrove is his name and he is a great guy, along with being very good. He is 2nd in the country in this field. Could be first by now.

    Sorry I didn't think of him sooner. Google his info and tell him I said hi!

    Hugs and prayers

    C


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  • placid44
    placid44 Member Posts: 497
    edited June 2017

    https://www.sapling.com/8027680/can-401k-early-dying

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