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Old 04-15-2014, 09:13 AM   #21
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The ability to do withdrawls at 55, is defined in the plans Summary Plan Description. Get a copy, from HR or benefits and read it. If it doesn't spell it out, a 72t is your next best option.
FYI- I had to read the SPD to the first benefits specialist, then it was OK.
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Old 04-16-2014, 08:24 AM   #22
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I have contacted our Plan Provider thru our Benefits Center - that is the only avenue of communication I know of. The actual assets under management is Hewitt - which is surprisingly not US but UK...so they must have a US branch - but their website makes my head explode.

I did reply back to the Benefits Center with the quoted excerpt from Pub 575 and the link to the IRS page - I have not heard back in the promised 24hr response time for inquiries - so I may have made their head explode! (ah - Karmic balance).

I've looked into the 72t approach - that may be my ticket.
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Old 04-16-2014, 08:41 AM   #23
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Do you have a copy of your plans summary (SPD ). That should tell you what is allowed.
The IRS rules allow the withdrawal at 55 but does not require plans to do it.
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Old 04-16-2014, 08:44 AM   #24
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Do you have a copy of your plans summary (SPD ). That should tell you what is allowed.
The IRS rules allow the withdrawal at 55 but does not require plans to do it.
Going to download it today at work.

If it doesn't have the Rule of 55 wording - it should. And I'll let them know that.

It is no skin off their nose and it's MY money.
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Old 04-16-2014, 11:14 AM   #25
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...If it doesn't have the Rule of 55 wording - it should. And I'll let them know that....
Not sure you understand. If the plan was amended so that it qualifies for penalty-free withdrawals for employees leaving service after age 55 then I would agree that the SPD should have that wording.

But if the plan wasn't amended, then the SPD should not have that wording.

Perhaps if it doesn't you can ask why the plan wasn't amended.
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Old 04-16-2014, 11:44 AM   #26
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I checked DW's SPD just for kicks, since I'm planning to rollover to an IRA after the last company contribution. They had a pretty ambiguous paragraph about separating at 55, though no other words about it in the normal withdrawal section.

The weird thing I encountered was that she can't withdraw the company contribution until age 70 or 70.5, I forget which. I've never heard of that kind of a restriction before. It didn't apply to simple rollovers. There were also restrictions on how many withdrawals she could take per year (one or two depending on type). Not terribly convenient if you wanted to change your withdrawal every month.
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Old 04-16-2014, 12:13 PM   #27
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I have heard of restrictions on the frequency of withdrawals.

To restrict withdrawal of company contributions until age 70 or 70 1/2 is downright bizarre. What do you mean that it doesn't apply to "simple" rollovers?

I'd have to question whether such a restriction is legal. I always thought that once you were vested, that company contributions from that point forward were vested as well and can be withdrawn at any time subject to tax and penalties.
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our option for no 10% tax hit.
Old 04-16-2014, 12:39 PM   #28
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our option for no 10% tax hit.

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Originally Posted by BBQ-Nut View Post
So, I'm really crunching scenarios to be FIRE - and I've asked my current megacorp 401k benefits center about the rules for early distributions from the 401k.

If I can RE - it will be after my 55 birthday while still employed at Megacorp.

So, when I asked the Benefits Center just to confirm that I could make distributions (not a roll over) from the 'qualified Plan' the reply was no - I have to wait until 59 1/2 - otherwise I get hit with the 10% early withdrawal.

I then replied that I have read that you *can* make early withdrawals w/o the 10% penalty as long as I am older than 55 and it is from that 401k.

I got a follow up reply saying, no you can't.

Hmmm...so I checked the IRS Publication 575 and it says I can.

So, should I just say thank you to the Benefits Center and let any penalty be the business of me and the IRS, or can my Megacorp 401K plan administrator really dictate/restrict my distributions if I do retire after 55 and not get anything before 59 1/2?

Attached is a slide from a retirement seminar from the megacorp I work for. We can take distributions pre 59.5 without the 10% hit as long as we "retire" and "separate service" as they call it. It maybe have been covered in this thread but it's the SEPP part that is key for us (substantial equal periodic paymenets). We can keep ours in our 401K plan if we like. Most of the folks I talk to do that for the first 4.5 yrs. Hope this helps.

I would ask your beneifts dept again! Cheers.

55_401K.PNG
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Old 04-16-2014, 12:41 PM   #29
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I have heard of restrictions on the frequency of withdrawals.

To restrict withdrawal of company contributions until age 70 or 70 1/2 is downright bizarre. What do you mean that it doesn't apply to "simple" rollovers?

I'd have to question whether such a restriction is legal. I always thought that once you were vested, that company contributions from that point forward were vested as well and can be withdrawn at any time subject to tax and penalties.
"Simple" rollover was a rollover of the entire 401k into a traditional IRA.

Went back to the SPD for this:

"
Withdrawals After Age 59½
If you are age 59½ or older, you may withdraw all or a portion of your accounts
attributable to your regular and/or Roth contributions. Until your employment ends,
Company Matching Contributions are not eligible for withdrawal before age 70½.
You may not make more than one age 59½ withdrawal in any six-month period, and the
minimum withdrawal you are allowed to take is $200.
Withdrawals After Age 70½
If you are age 70½ or older, you may withdraw all or a portion of your 401(k) Retirement
Savings Plan account, including Company Matching Contributions.
You may not take more than one age 70½ withdrawal in any six-month period, and the
minimum amount you are allowed to take is $200 (or the remaining balance in your
accounts)."

So the employee contribution thing was only if you are still employed with them. That's an easy problem to fix!

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Old 04-16-2014, 12:48 PM   #30
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When it's time for her to retire (at or around age 55 in less than 2 yrs) I will approach them one more time with it. However, if I don't like the answer, I guess we'll just roll it into her IRA and decide from there how/when to access the account.
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Old 04-16-2014, 01:05 PM   #31
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....We can take distributions pre 59.5 without the 10% hit as long as we "retire" and "separate service" as they call it. It maybe have been covered in this thread but it's the SEPP part that is key for us (substantial equal periodic paymenets). We can keep ours in our 401K plan if we like. Most of the folks I talk to do that for the first 4.5 yrs. ....
I think this is the same as the 72t alternative that the OP refers to as his plan B in post #22.
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Old 04-16-2014, 01:05 PM   #32
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We had the same issue with our HR. I think it was the issue, as noted above, that you have to leave the company. The trustee had no issue though and had us sign up for direct deposit.

However, once you roll it into an IRA, you lose the 55 - 59 1/2 bonus since there is clearly a penalty for non-72(t) withdrawals from the IRA.
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Old 04-16-2014, 02:04 PM   #33
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I think the 55 rule requires you to separate from your Employer before getting the 401k distribution penalty-free. From your post it was not clear if you communicated this intent to the representative that you spoke with. Best bet is to review the plan document.

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Old 04-16-2014, 03:01 PM   #34
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As someone stated above, apparently even though the IRS "allows" penalty-free withdrawals from a 401k plan once the person retires during the year of their 55th birthday, the "plan" does not have to "allow" it if they don't want to. I don't see how this is right, though. Very frustrating.
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Old 04-16-2014, 03:42 PM   #35
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As someone stated above, apparently even though the IRS "allows" penalty-free withdrawals from a 401k plan once the person retires during the year of their 55th birthday, the "plan" does not have to "allow" it if they don't want to. I don't see how this is right, though. Very frustrating.
It would be even more frustrating if it wasn't set forth in the plan documents that every employee has access to but never reads.
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In the same boat as you
Old 04-16-2014, 06:30 PM   #36
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In the same boat as you

We have run into the same problem as you. We cannot withdrawal from my husbands 401K plan. We have to do a roll over into an IRA. The plan is not written as such that after 55 and he retires from the company we can take out any money. So after talking to Fidelity and my accountant, we have decided December 31st of 2014, my husband will retire (he was going to retire at the end of June, but our CPA advised us not to for tax reasons since he has already made money this year). We will not be using the 72T rule as it doesn't give us enough $ to do what we want. We will instead do an NUA from our company stock in our 401K plan to cover our expenses (plus some cushion) for 30 months. No 10% penalty. Only have to pay capital gains tax on it. Not ideal, but it works. Good luck figuring our your numbers.
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Old 04-16-2014, 06:50 PM   #37
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I retired from evil corp at age 55. Our plan allowed for early withdrawal at age 55. Fidelity was the plan administrator and they contacted me about rolling over the 401K into a managed account at Fidelity. I had to explain to THEM that I couldn't withdraw penalty free if I left the 401K.
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Old 04-16-2014, 07:10 PM   #38
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Actually it my Fidelity rep's recommendation that made me check into the 55 rule. I'm sad to say I didn't know what a SPD was at that time.

Megacorp's SPD is very liberal, withdraw when you want, the amount you want, or set up periodic withdrawls(they can be altered anytime).

Its defined as a hardship withdraw, 55 or older and separated from service. I guess they wanted us old timers to go away.
MRG

Edit to add: I'm grateful Megacorp made this very easy.
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Old 04-16-2014, 08:40 PM   #39
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Still have not heard back from my last reply quoting the excerpt from IRS Pub 575.

No matter, if that doesn't work out, then I did previously confirm that when I 'separate from service' I can do a partial IRA Rollover.

So that leaves open the option of rolling over a portion of my 401k - enough to do the 72t with a balance sized to meet my needs between 55 and 59 1/2.

Take that megacorp!
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Old 04-17-2014, 10:34 AM   #40
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So that leaves open the option of rolling over a portion of my 401k - enough to do the 72t with a balance sized to meet my needs between 55 and 59 1/2.

Take that megacorp!
Sounds like you have a solution to ER! Congratulations!
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