Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?
A) Shauna is 58 years of age but not yet retired when she receives the distribution.
B) Shauna is 60 years of age but not yet retired when she receives the distribution.
C) Shauna is 69 years of age but not yet retired when she receives the distribution.
D) Shauna is 56 years of age and retired when she receives the distribution.

Question

Quizplus · Accepted Answer

According to IRS rules, if a person withdraws funds from a 401(k) account before they turn 59½ or before they retire, they will be subject to an early distribution penalty of 10% in addition to ordinary income tax. Therefore, Shauna will be subject to an early distribution penalty in situation A as she is not yet 59½ and has not retired.

Shauna Received a Distribution from Her 401(k) Account This Year