10 Ways to Avoid Tax Traps with an Early Retirement Distribution
The IRS alerts you to the following information regarding early retirement programs:
 Most withdrawals from IRAs before age 59.5 will be treated as early distributions.
 Most early distributions are subject to a 10% (of distribution) tax. On a traditional IRA, the amount received is usually taxable income as well.
 All early distributions must be reported to the IRS, even if not subject to tax.
 The early distribution tax can be avoided (or mitigated) by rolling funds into a qualified retirement plan or another IRA within 60 days. You must roll the entire amount into the IRA to oompletely avoid taxation.
 Monies paid to you or a beneficiary from a traditional IRA generally are taxable income.
 Any part of a distribution from a traditional IRA which was initially nondeductible is not taxed when withdrawan.
 Withdrawals from a Roth IRA are not taxed (except for earnings on the Roth investment)
 Unless you made nondeductible contributions to other retirement plans; amounts received from those plans would be treated as taxable income.
 Certain early distributions, including first home purchase, certain educational expenses and costs associated with becoming disabled, may escape the 10% early distribution tax.
 IRS Publications 575 and 590 can be helpful if you are receiving early retirement distributions.
The article provides a concise summary of tax implications from distributions from IRAs and some pension plans. It needs to be more clear on the tax implications of salary-based bonuses for early retirement and post-retirement fringe benefits.