Rule of 55

[Texas Farmer]

Can anyone tell me if I can work/consult part time for the company I retired from and still withdraw from my 401k without penalty?


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[Ronstar]

You should check with your plan administrator, but if you are a consultant and not an employee I would think that withdrawing from your 401k would be no problem given that you meet other plan requirements

And welcome to the forum!

 

[MRG]

Mine reads '(55 or older) and terminated from service'. So I couldn't 'w*rk' there, believe I could consult. That said it's all up to the verbage in your Summary Plan Description. Hopefully it's is very clearly written.

 

[Texas Farmer]

Thanks for the info! I'll call them first thing tomorrow and see what they say. If there's a problem, would rolling it over and going the 72T/SEPP route be feasible? I'll turn 55 next month and will FIRE soon there after.


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[MRG]

I believe 72t works. That was my plan B. Didn't have to use it, so that's where my experience stops. I thought there was a tread with some content about how folks set them up.

Welcome to the forum.

 

[Texas Farmer]

Thanks again!


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[ERhoosier]

Mine reads '(55 or older) and terminated from service'. So I couldn't 'w*rk' there, believe I could consult. That said it's all up to the verbage in your Summary Plan Description. Hopefully it's is very clearly written.

+1 on checking the contract language CAREFULLY. I know some firms do not allow 401k WD's until ALL service with the company is terminated, inc PT/consulting service. YMMV.

 

[samclem]

Can anyone tell me if I can work/consult part time for the company I retired from and still withdraw from my 401k without penalty?

If the company says "no" (I doubt they will), then how about this: Retire from the company and then start consulting. When you start consulting, open up your own Solo 401K for your new business (you don't need to be an LLC or anything else, but you can't have any employees, except your spouse). Call your business "Texas Farmer Consulting". Assure that your new plan document allows withdrawals at age 55 if you terminate the plan. Roll all the money from the present company 401K to your new Solo 401K (the company >can't< prevent this). Once the money from your old 401K is rolled over, you close that plan and begin your withdrawals.

If you later want to contribute to a Solo 401K again, just open a new plan with a new name.

These SOlo 401K plans are not hard to set up, and it can be done for free. But, if you don't want to do this: yes, you could roll the money into your IRA and then do 72(t) withdrawals. Check on the allowed amounts and be sure it will meet your requirements.
I am not a lawyer or an accountant, and have no particular expertise in this subject

 

[38Chevy454]

With apologies to OP, but this may be helpful info for the discussion. Just a question, I thought if you did the 72t withdrawals that you could not have any income from working. Whether as an employee or consultant - if it is wages it messes up your 72t and you are then subject to penalty?

 

[samclem]

With apologies to OP, but this may be helpful info for the discussion. Just a question, I thought if you did the 72t withdrawals that you could not have any income from working. Whether as an employee or consultant - if it is wages it messes up your 72t and you are then subject to penalty?

You can have earned income while taking 72(t) withdrawals, so this shouldn't be a problem.
Also, each IRA account stands on its own with regard t the 72(t) withdrawals. So, if the amount of the required distributions under all three of the 72(t) calculation methods is more than a person wants to take, they can just divide the IRA into separate accounts as needed so that the 72(t) withdrawal amount from the "tapped" account is what they want. The biggee is that once a 72(t) withdrawal is started, it must be continued for 5 years or until age 59 1/2 , whichever is longer (or pay the big penalty). If a person starts making a lot of earned income as a consultant, this could push them into a higher tax bracket than they anticipated.

Note: Check all of this, I'm not an expert.

 

[48Fire]

I am doing 72t and I was approved to come back as contractor/consultant

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