I was laid off from my company last year. I was under 55 years old on my last day of work, but was 56 when I took a total distribution from the company's qualified retirement plan. Am I subject to the 10% early distribution penalty?

I was laid off from my company last year. I was under 55 years old on my last day of work, but was 56 when I took a total distribution from the company's qualified retirement plan. Am I subject to the 10% early distribution penalty?

Whether the penalty applies depends on your age on the last day of the year in which you left employment. Your age on the date you receive the distribution is not important.

Usually, there is a 10% penalty on distributions from qualified retirement plans and traditional IRAs before age 59½. However, the penalty is waived for distributions made by a qualified retirement plan if separation from service occurs during or after the calendar year in which you reach age 55. This penalty exception does not apply to distributions from IRAs.