IRAs charge a penalty if I take it out before age 59 1/2. Does that also apply in qualified retirement plans?
Not if the benefit is taken out at the plan’s “Normal Retirement Age”, which can be as low as age 55. Otherwise it does apply. IRA’s also require distributions beginning at age 70 1/2. Does that also apply to qualified plans? Yes, the same rule applies. In a defined contribution plan, the minimum distribution is calculated the same way as in an IRA. In a defined benefit plan, you must withdraw your accrued annual benefit. By when do I have to start such a plan to get a deduction for the year? If you are a calendar year tax-payer, you must have signed an adoption agreement by December 31. If you pay taxes on any other basis, you have until the last day of such year. Don’t I have until April 15? No. If you adopt a SEP (Simplifed Employee Pension), then you have until April 15, if you are a calendar year tax-payer. But for any other qualified plan, the adoption agreement must be signed by the last day of the year. No grace period. I already have a SEP. Can I add a qualified plan as well?
