Q: You said retirement plan participants must pay a 10 percent penalty tax for withdrawals before 55 (see 4/18/05 issue). Isn't the correct age 59 1/2? C.F., via e-mail
A: In most cases, you'd be correct: Withdrawals before age 59 1/2 are subject to the 10 percent penalty, unless you're eligible for certain exceptions, such as withdrawals to pay medical expenses above 7.5 percent of your AGI. But another little-known exception exists: You can tap into your qualified plan without suffering the 10 percent early-withdrawal penalty if you "separate from service" and are at least age 55 at the time. (IRC Section 72(t)(2)(A)(v)) Tip: That separation-from-service exception applies only to participants in qualified retirement plans, not IRAs.