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Wednesday, January 31, 2007

When My Love Crosses Over

PERS has finally gotten around to sending out 1099-R forms to retirees. Most have received them in the past couple of days. Already there are questions as some retirees are receiving two 1099-R forms where before they had only received one. There is a simple explanation for this. Prior to age 59 1/2, retirees are receiving benefits reported to the IRS as an "early distribution exception" signified by a number "2" in box 7 of the 1099-R. Turn the form over for an explanation of the meaning of the code "2" in box 7. The first 1099-R that you receive is for those months during 2006 that you were UNDER the age of 59 1/2. The second 1099-R will be for the months AFTER you turned 59 1/2 and will be signified by having nothing in box 7. Once you've turned 59 1/2, all subsequent 1099-R's will be issued without the early distribution exception. Congratulations. You've crossed over and now all your retirement funds (IRA, Roth, 401-K, 403-B, 457) are accessible to you without penalty for early withdrawal. That calls for a celebration of some sort.

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