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What I Did
Old 10-11-2007, 10:33 PM   #21
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What I Did

I rolled my penision cash out into Vanguard as an IRA. I rolled over half of my 401K into a separate Vanguard IRA. I left enough in my 401K to live about 7 years. I am 55.

The ideas were: 1) Vanguard is cheaper. 2) Vanguard has more options. 3) If disaster strikes, I can access the IRA's through separate 72t's. Hopefully things will not deteriorate to the point where I have to access both accounts. I am planning to leave the pension cash out ride for 10 years.

I hope Ihave not out smarted myself.
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Old 10-12-2007, 02:07 AM   #22
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Originally Posted by limpid lizard View Post
I rolled my penision cash out into Vanguard as an IRA. I rolled over half of my 401K into a separate Vanguard IRA. I left enough in my 401K to live about 7 years. I am 55.

The ideas were: 1) Vanguard is cheaper. 2) Vanguard has more options. 3) If disaster strikes, I can access the IRA's through separate 72t's. Hopefully things will not deteriorate to the point where I have to access both accounts. I am planning to leave the pension cash out ride for 10 years.

I hope Ihave not out smarted myself.
I think you are being smart. Once you are 59 then I'd roll it all over to Vanguard.

I would recommend that, when possible, people in the 55 to 59.5, sort out the issues while still working. My experience is that it helps to be working at the company when deal with 401K administrators, on unusual requests.
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Old 10-12-2007, 05:26 AM   #23
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[from a 401(k) plan description:]

Quote:
Withdrawal Penalties 10% IRS early withdrawal penalty if withdrawn before age 59 unless exception applies.

Exceptions include:
  • Normal retirement age
  • Death
  • Disability
  • Substantially equal payments made over life expectancy
  • Termination of service after five years and reaching age 55
  • Rollover to an IRA
  • Qualified military reservist
And I don't have a cite, unfortunately right now, but I researched this in past, and I believe it's actually 54 plus a day, BTW, if you were fortunate enough to have been born on Dec 31 -- since the IRS applies the age rule like so:


Quote:
Q. How is my age calculated?
Quote:
A. Age is your attained age as of your birthday in the calendar year that goes with the distribution year.
Don't trust my word, though, find the actual citation, but I am confident of both parts, so the net result is that:

With no 72(t), a person can be 54 1/2, and take out every penny of their 401(k) if they quit or are terminated and does not go back to work, and avoid the 10% penalty. Watch out for taxes on gross income, though!

Greaney also provided advice on this route on his site:

Quote:
You can make penalty-free withdrawals from a 401(k) at age 55. You must wait until age 59 1/2 to make penalty-free withdrawals from an IRA. While this seems like a big break for a 55-year-old retiree, there are several things to consider; (1) Your employer must make it convenient for an ex-employee to make retirement withdrawals, many employers can't be bothered, (2) Rolling over your 401(k) funds to an IRA may increase the variety of investments available to you and lower your fees. If that's the case, the hassle of SEPP withdrawals from an IRA may be worth it.

Note: There is one fine point that many people miss in taking penalty-free withdrawals from a 401k at age 55. To do so, you must terminate your employment no earlier that the year in which you turn age 55. (See IRS Notice 87-13) If you retired at age 54 and waited until age 55 to make withdrawals from your 401k, you would not be able to make unlimited penalty-free withdrawals. You could only make penalty-free withdrawals by using SEPP.
Retire Early: Can I withdraw money from my IRA before age 59 ?


And, here is a clip that includes a citation to the IRC:

Quote:
...section 72(t)(2)(A)(v) provides an exception to the 10% penalty for distributions made after the employee separates from service for the employer maintaining the plan, but only if the separation from service occurs during or after the calendar year in which the employee attains age 55. See Notice 87-13, 1987-1 C.B. 432, Q&A-20.
10% Additional Income Tax on Early Distributions: The Exception for Distributions After Age 55 and Separation from Service, Revisited
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Old 10-12-2007, 07:38 AM   #24
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OK, so I'm making this more complicated that I need to? As long as I keep my funds in the 401K and not roll it over into an IRA upon retirement, then I would qualify for the exception to the normal 10% penalty and I can withdraw from the my 401K between 57 and 59 1/2 any way I choose?
That's the consensus, for the employer you work past the age of 55. However, the 401(k) plan rules also have to allow it. Get a copy of the Summary Plan Description and read it for yourself. Don't rely on possibly incorrect web site software or what some clerk tells you.

Get the SPD and read if for yourself.
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