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Old 07-28-2014, 01:34 PM   #41
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Just got confirmation that I can take my 401k in one lump sum distribution or take a portion in distribution and roll the remainder over. I was hoping to be able to withdraw over two years to keep tax rate down and get me to 59 1/2.
Hmmm....will need to think about this.


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Old 07-28-2014, 07:13 PM   #42
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Would it still qualify without paying the penalty if I quit my job after 55 and rolled over some of the 401K money from my current/last employer to an IRA at another brokerage firm and started the withdrawal from there?
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Old 07-28-2014, 09:13 PM   #43
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I don't think this is true. The FAQ on SEPP from the IRS gives an example of a 50-year-old with an IRA looking to avoid the penalty, and their table on exceptions shows "yes" for both 401(k)s and IRAs in the "equal payments" row.
I think BBQ-Nut was not referring to a SEPP but just where one withdraws as needed/wanted.
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Old 07-28-2014, 09:14 PM   #44
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Would it still qualify without paying the penalty if I quit my job after 55 and rolled over some of the 401K money from my current/last employer to an IRA at another brokerage firm and started the withdrawal from there?
No, unless you did SEPP.
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Old 07-28-2014, 09:19 PM   #45
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Would it still qualify without paying the penalty if I quit my job after 55 and rolled over some of the 401K money from my current/last employer to an IRA at another brokerage firm and started the withdrawal from there?
When I did a rollover it had to be all or nothing. Not sure if that was plan specific or a regulation. YMMV.

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Old 07-28-2014, 09:19 PM   #46
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Thank you very much for the people who suggested me to get the Summary Plan Description from my 401K provider, as well as one poster telling me to be persistent. I called them back today and asked for the SPD (which happened to be online - the agent told me how to get to it.). The document clearly states that you can receive distributions without the 10% fed penalty "if you terminate employment after reaching age 55."
Great for you. Not all plans allow it. There is an old thread on this but as I recall back in 1996 there was legislation that allowed penalty-free early withdrawals if the plan participant left service after turning 55 (or it may have been the year you turn 55, I don't remember the details). Some plans made the requisite changes to their plan to allow it but others have not, which is why there is diversity out there.
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Old 07-28-2014, 11:51 PM   #47
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I am living proof you can do it. I am 57, retired at the beginning of this year when I was 56. I withdrew a large chunk from my 401k and rolled it over to an IRA, but left enough in my 401k to last till I am 59 1/2. Now I make withdrawals from my 401k with no penalty as my retirement income. Works great!
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Old 09-30-2014, 02:35 PM   #48
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I am living proof you can do it. I am 57, retired at the beginning of this year when I was 56. I withdrew a large chunk from my 401k and rolled it over to an IRA, but left enough in my 401k to last till I am 59 1/2. Now I make withdrawals from my 401k with no penalty as my retirement income. Works great!
That's not true for all plans. With my employers plan you can access funds in your 401k after or during the year you turn 55 without the 10% penalty (after your retire/resign) however you must take full distribution. In other words they make no provisions and it is not possible to take part of the assets and leave the rest in the plan.
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Old 09-30-2014, 05:01 PM   #49
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it really is simple. if your plan allows for periodic distributions you can leave your job after 55 and take the periodic payments. if your plan does not provide for periodic distributions then your only choice is roll it over ,72t it and take your own periodic payments.
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Old 10-02-2014, 08:01 PM   #50
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it really is simple. if your plan allows for periodic distributions you can leave your job after 55 and take the periodic payments. if your plan does not provide for periodic distributions then your only choice is roll it over ,72t it and take your own periodic payments.
Another consideration is if you have a significant amount of company stock that has gone up significantly in value in your 401k it might work to your advantage to calculate what the cost basis is for the stock and what kind of NUA value (taxed as a LTCG) it has. You might still make out well if you have to take a lump sum distribution because your plan doesn't allow periodic distributions. My 401k plan allows for distributions of stock held within the plan. But does not allow for periodic distributions. Worth talking to a CPA to find out if it is a good thing for your situation. YMMV
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Old 10-04-2014, 03:31 PM   #51
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I had to meet the state rule of 86, which I did last year. Otherwise, since I'm 55, I would roll it over to an IRA and do the 72t withdrawals mentioned early in the thread.
Sorry if this has already been mentioned--haven't read all the posts.
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Old 10-04-2014, 04:31 PM   #52
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Another consideration is if you have a significant amount of company stock that has gone up significantly in value in your 401k it might work to your advantage to calculate what the cost basis is for the stock and what kind of NUA value (taxed as a LTCG) it has. You might still make out well if you have to take a lump sum distribution because your plan doesn't allow periodic distributions. My 401k plan allows for distributions of stock held within the plan. But does not allow for periodic distributions. Worth talking to a CPA to find out if it is a good thing for your situation. YMMV
When I left my company back in 2008 (I was 45, well under 55 which can qualify for taking distributions without the 10% penalty), I chose to take my large amount of company stock using NUA (97% was NUA) so it was subject to LTCG. NUA is not subject to the 10% penalty, either, only the original cost basis. This cashout did trigger the AMT and raised the income tax bite on the rest of my income (i.e. mostly wages).

I also had some after-tax money in the plan which I had to totally liquidate as a condition of using NUA. The after-tax money was also not subject to any taxes including the 10% penalty, of course. What I ended up doing was cashing out anything which was not subject to ordinary income taxes (besides the miniscule cost basis of the company stock) and minimize the tax bite on anything else. I did a direct rollover into an IRA of all the pretax, company match, and earnings on both so there was no tax bite on that, either.
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Old 10-04-2014, 05:56 PM   #53
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Thanks good to know...I have an old company's 401K still as well (left it there because it contained a bunch of company stock and was doing well so saved me some work).

I'm not sure that they even allow the 55 withdrawl but I can check on it...or just wait a few years and it comes a mute point
For me it's not worth the hassle. I'll just wait until I'm 59 1/2 to collect. Only 501 more days and I'll take the year end bonus, cash out enough for the next year or so, keeping in the 15% tax bracket. Besides I can't even figure out how to retire officially at mega corp. There's tons of info on working and saving, HR policies, vacation, short term disability etc. But I can't find anything on actually retiring. The retiree medical that some of us still have available has become a best kept secret with nothing on the website. Don't mention the HR rep. I've found that they are less than helpful and actually dangerous at times.
Meanwhile I'll continue to slowly burnout waiting for some clarity on the subject.
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Old 10-05-2014, 09:23 AM   #54
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I checked with my employer and they confirmed that I could take a distribution from my 401k penalty free, but I would need to rollover the remaining balance into an IRA, in other words, I couldn't keep the 401k.
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Old 10-05-2014, 01:56 PM   #55
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I checked with my employer and they confirmed that I could take a distribution from my 401k penalty free, but I would need to rollover the remaining balance into an IRA, in other words, I couldn't keep the 401k.
Yes it's simple; but there are many variations. First your plans SPD has to include the proper verbage per IRS regulations. Then the plan administrator(IIRC) has rules regarding how the distribution process works(that's probably your brick wall). Both have a say in if/how you can receive your funds.

I watched my Megacorp change the plan administrator rules when they wanted 'old timers' to leave the organization. YMMV fits this thread perfectly. Best wishes to you.

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