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Old 06-16-2016, 02:00 PM   #21
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I rolled it into my current employer 401k
Distributions from IRAs don't qualify for the age 55 penalty-free treatment.

If you take a distribution from your current 401k and you separate in or after your 55th year, then the distribution should be penalty-free. Shouldn't matter that the funds were originally rolled-in from an external source.

If one's current 401k supports inbound rollovers from traditional IRAs then this could be a strategy to get more funds into a 401k that would be available penalty-free.

-gauss
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Old 06-16-2016, 02:04 PM   #22
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If one's current 401k supports inbound rollovers from traditional IRAs then this could be a strategy to get more funds into a 401k that would be available penalty-free.

-gauss
Good point. No IRAs here. I don't plan on withdrawing from the company 401k plan any time soon. I'll wait till 59.5:

1) stable value fund - tough to get that kind of return outside an institutional fund
2) low cost - the k plan uses vanguard index funds, among others
3) annuity options - the k plan has whole/partial life/J&S annuity payout options

If I retire before then I'll just draw on cash/metals/LI or my DB pension which can begin in 3 years.
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Old 06-16-2016, 03:54 PM   #23
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Hello from Tennessee. I’ll be 58 in September and would like to retire at that time. I just spoke with a financial planner who said I can make withdrawals from my company retirement plan (401k), without penalty, providing the following is met:

• the 401k is a company retirement plan
• I’m separated from the company
• I’m over 55 when separated from the company

I’ll meet this criteria, but didn’t realize this was possible without being penalized. I initially was seeking his advice/guidance using the 72t plan and he explained I won’t need to go that route. Can anyone tell me if his advice is correct? Thanks in advance.
As others have said, it depends on the provider. I had the same question a few years ago, and everyone here suggested that I got a document called "Summary Plan Description" from my provider. (I didn't want to talk to HR because I didn't want them to know that I was planning an exit... They did go over the age 55 rule on my exit interview however...). The provider's document stated that I could in fact withdraw money from my 401K penalty free if I was 55 or older when my employment was terminated. The withdrawal doesn't need to be periodical or the same amount like with 72t, at least with my provider. This gave me options to withdraw money from my 401K as long as I did not roll that money over into my IRA. One thing I don't like about my 401K is that I will have to withdraw money proportionately from all my invested funds (instead of from a core cash fund like you could do with IRA's), so I am slowly moving my money out of my 401K to my IRA at the preferred time, but I am keeping some left in my 401K until I turn 59.5 years, just in case. It is great to have an option to be able to take out any amount of money any time without penalty, since I am not 59.5 years old yet.
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Old 06-16-2016, 04:01 PM   #24
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I'm planning to RE next year at 57. A portion but not all of my IRA funding was from a 401K rollover about 12 years ago. Do I need to wait to 59 1/2 to tap that? Not a problem if yes.
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Old 06-16-2016, 04:26 PM   #25
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Thanks to everyone who replied. Just got off the phone with Vanguard, and providing the youngster who was assisting me knows his stuff, my current plan does not allow early distributions other than the norm, hardship, etc. He said I’d need to close out the retirement account (401k) and roll it over to an IRA. At that point I can make unlimited withdrawals w/o penalty. However, after looking at the replies here and the thread gauss referred to (quite a discussion), it appears I would get hit with the 10% penalty if I take distributions from the IRA setup from the rollover. If I understand it right, then the only alternative to avoid the 10% is the 72t plan, correct?
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Old 06-16-2016, 04:35 PM   #26
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Thanks to everyone who replied. Just got off the phone with Vanguard, and providing the youngster who was assisting me knows his stuff, my current plan does not allow early distributions other than the norm, hardship, etc. He said I’d need to close out the retirement account (401k) and roll it over to an IRA. At that point I can make unlimited withdrawals w/o penalty. However, after looking at the replies here and the thread gauss referred to (quite a discussion), it appears I would get hit with the 10% penalty if I take distributions from the IRA setup from the rollover. If I understand it right, then the only alternative to avoid the 10% is the 72t plan, correct?
You are right; you cannot take out from IRA's (or roll over IRA's) penalty free before you reach 59.5 years old, like this youngster told you. The only thing you can do with IRA is the 72t plan.

Anyway you can get a hold of the ""Summary Plan Description" document of your 401K? It should state all the information you need. My analyst gave me wrong information at first also. (I came back to this forum and that's when they told me to get the ""Summary Plan Description" document.) I called them back to get the document, and after that, I called them back again with the document in hand, the answer finally changed. I am realizing now that this problem wouldn't have happened if I talked to their retirement specialist from the beginning instead of talking to the general analysts. (This is with another firm however, but I am assuming who you talked to is a generalist, since he made a pretty big mistake on the IRA withdrawal...)

DO NOT roll over your IRA until you find out the facts about your 401K.
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Old 06-16-2016, 04:37 PM   #27
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. Can anyone tell me if his advice is correct? Thanks in advance.

Yes. At least those rules apply to my 401k. And yes, you can withdraw without using 72t. However understand all your rules before withdrawing. In my 401 k, I have limits on how and when I can withdraw. Doing it wrong can impact you ability to take advantage of NUA tax benefits if withdrawing company stock.


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Old 06-16-2016, 04:51 PM   #28
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JBeeze,

Here is the thread I posted a couple of years ago.

The rule of 55?

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I'm planning to RE next year at 57. A portion but not all of my IRA funding was from a 401K rollover about 12 years ago. Do I need to wait to 59 1/2 to tap that? Not a problem if yes.
I believe the answer to your question is in the linked thread above..
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Old 06-16-2016, 05:48 PM   #29
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Thanks tmm, gauss, and everyone else that chimed in. Going to ask my crack HR team for a copy of the SPD. My guess is I’m going to go with the 72t. Great website. Loads of good information.
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Old 06-16-2016, 06:25 PM   #30
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JBeez - it sound like the young HR rep was clueless and gave you bad advice (roll it to the IRA to withdraw?)

You definitely want to get a copy of the summary plan description. I've had 401(k)s that allowed 55+ at separation access to the money and my final corporate overlord did not allow it. (And they'd forced us to roll from old (better) plan to their plan when they acquired us.)
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Old 06-16-2016, 06:32 PM   #31
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I'm planning to RE next year at 57. A portion but not all of my IRA funding was from a 401K rollover about 12 years ago. Do I need to wait to 59 1/2 to tap that? Not a problem if yes.
Yes, or pay the 10% penalty + normal taxes.
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Old 06-16-2016, 06:45 PM   #32
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Mine doesn't
mine does. As suggested, read the SPD.

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fyi, They will automatically take out 20% for federal withholding on any
distributions from 401k.
Do it in December, not January!

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JBeez - it sound like the young HR rep was clueless and gave you bad advice (roll it to the IRA to withdraw?)

You definitely want to get a copy of the summary plan description. I've had 401(k)s that allowed 55+ at separation access to the money and my final corporate overlord did not allow it. (And they'd forced us to roll from old (better) plan to their plan when they acquired us.)
Yes, bad advice!

I parted ways when I was 54 (but in the year I turned 55), and expect no penalties because the SPD says so. We'll find out next tax filing season.
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Old 06-16-2016, 07:47 PM   #33
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Another option is just try to do it. Attempt a distribution of say $100 from your 4o1k. If you receive the funds then you know that disbursements are allowed for your age and status. At tax time you will see whether a penality applies or not.

Much easier to "dry run" this with a $100 withdrawal as opposed to tens of thousands of dollars.

-gauss
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Old 06-17-2016, 06:33 AM   #34
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Assuming that your plan does not allow penalty free withdrawals, do you have other assets that you could utilize between 58 and 59 1/2?

For example, if you have a paid off house that you will be keeping for at least a year and a half you could do a HELOC and draw on it for living expenses from 58 to 59 1/2 and then later use 401k withdrawals to pay down the HELOC.
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Old 06-17-2016, 01:44 PM   #35
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Assuming that your plan does not allow penalty free withdrawals, do you have other assets that you could utilize between 58 and 59 1/2?

For example, if you have a paid off house that you will be keeping for at least a year and a half you could do a HELOC and draw on it for living expenses from 58 to 59 1/2 and then later use 401k withdrawals to pay down the HELOC.

Another potential source of funds to tide you over till 59.5 is if your plan permits 401k loan repayment after you are no longer actively employed. I was surprised to find that I didn't have to repay my loan immediately after retirement and could actually initiate a new loan if I wanted to.


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Old 06-18-2016, 06:05 AM   #36
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We work with small employers and for them, at least, it is fairly easy to have the third party administrator add a provision to the plan for the withdrawals. I've seen a number of them amend plans to add hardship withdrawals for their employees.

Mega type workplaces...I dunno. Might be worth asking the TPA or HR.
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