Withdrawal Credits, Pension Plan

A withdrawal credit is a tax-free amount that can be withdrawn from a pension plan without triggering an income tax liability. The amount of the withdrawal credit is based on the age of the plan member at the time of withdrawal.

For example, a plan member who is 55 years old can withdraw up to $2,000 per year tax-free. The withdrawal credit is reduced by $100 for each year that the plan member is under 65. So, a plan member who is 60 years old can withdraw up to $1,500 per year tax-free.

There are a few important things to keep in mind when taking a withdrawal credit from a pension plan. First, the withdrawal credit is only available for withdrawals from a registered pension plan (RPP). Second, the withdrawal credit is only available for withdrawals that are made after the plan member has turned 55. Third, the withdrawal credit is only available for withdrawals that are made in the form of a lump sum.

If a plan member takes a withdrawal from a pension plan before they have turned 55, the withdrawal will be subject to income tax. In addition, the withdrawal will be subject to a 10% early withdrawal penalty.

If a plan member takes a withdrawal from a pension plan in the form of an annuity, the withdrawal will not be subject to the withdrawal credit. However, the annuity payments will be subject to income tax.

Withdrawal credits can be a valuable tool for retirees who are looking to supplement their income. However, it is important to understand the rules and regulations governing withdrawal credits before making a withdrawal from a pension plan.