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The rule of 55?
Old 07-22-2014, 03:04 PM   #1
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The rule of 55?

Have you ever heard of the "rule of 55"? That you can withdraw money out of 401K if you are over 55 and no longer working (quit and retired or laid off and retired)?

Any gotcha's?
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Old 07-22-2014, 03:12 PM   #2
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I think you are referring to the rule of 72t, which enables you to take equal payments from your pre-tax accounts. Search for 72t and you will find more info. Or some other replies may provide better details than I can, I am not an expert on it.
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Old 07-22-2014, 03:13 PM   #3
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It's been mentioned in several threads recently. One catch is that IRS allows it but all 401k plans don't. IRS pub 575 is the source.

https://www.expertplan.com/articles/a022001.jsp
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Old 07-22-2014, 03:17 PM   #4
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Have you ever heard of the "rule of 55"? That you can withdraw money out of 401K if you are over 55 and no longer working (quit and retired or laid off and retired)?

Any gotcha's?
Yes your SPD(Summary Plan Description) must allow for withdrawls at age 55, not all do. Some allow for withdrawls but limit the number. Get a copy from your HR or benefits department.

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Old 07-22-2014, 03:19 PM   #5
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I think rbmrtn references the right thing: you can take withdrawals penalty-free from a 401(k) type plan if you leave employment in the year you turn 55, but the employer has to allow it.
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Old 07-22-2014, 03:20 PM   #6
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Yes, there are rules regarding being able to withdraw from your 401K when you are 55. The exception to the 10% tax rule includes: when distributions are made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55.

401(k) Resource Guide - Plan Sponsors - General Distribution Rules
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Old 07-22-2014, 03:22 PM   #7
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Such withdrawals are not allowed from a 401k originating with an employer for which you stopped working before age 55.
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Old 07-22-2014, 03:24 PM   #8
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It's such a well-known feature of many 401(k) plans that pretty much the entire early-retired kingdom knows about it. The OP must live in another kingdom.
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The rule of 55?
Old 07-22-2014, 03:28 PM   #9
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The rule of 55?

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Originally Posted by LOL! View Post
It's such a well-known feature of many 401(k) plans that pretty much the entire early-retired kingdom knows about it. The OP must live in another kingdom.

Well, it is kind of confusing...

I've learned a lot here - that's why a person asks!
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Old 07-22-2014, 03:38 PM   #10
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Well, it is kind of confusing...

I've learned a lot here - that's why a person asks!
Ya know, Steely, some people were born knowing everything. The rest of us have to ask.
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The rule of 55?
Old 07-22-2014, 03:43 PM   #11
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The rule of 55?

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Ya know, Steely, some people were born knowing everything. The rest of us have to ask.



That's funny! May I call you Rusty? (you can call me that too - I'm retired!). You can call me Steely (or you can call me Al).
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Old 07-22-2014, 03:43 PM   #12
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Ya know, Steely, some people were born knowing everything. The rest of us have to ask.
+1. You beat me to it.

I feel sorry for people who must carry the burden of perfection on their shoulders, while we mere mortals scrape by as best we can.......
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Old 07-22-2014, 03:48 PM   #13
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you generally have to "retire" at 55
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Old 07-22-2014, 03:50 PM   #14
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Old 07-22-2014, 05:03 PM   #15
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you generally have to "retire" at 55
I'm not sure one has to "retire". I believe the requirement is that you terminate employment from the employer where you have the 401K in the year you turn 55 or later, but that does not keep you from starting with another employer.

Of course, as has been stated by others, the 401K plan must allow this "55" thing.
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Old 07-22-2014, 05:10 PM   #16
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It's such a well-known feature of many 401(k) plans that pretty much the entire early-retired kingdom knows about it. The OP must live in another kingdom.
OUCH!!!

Some of the unfortunate have to wo*k and don't have time to read a lot of posts....
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Old 07-23-2014, 06:42 AM   #17
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Old 07-23-2014, 08:35 AM   #18
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I'm not sure one has to "retire". I believe the requirement is that you terminate employment from the employer where you have the 401K in the year you turn 55 or later, but that does not keep you from starting with another employer.

Of course, as has been stated by others, the 401K plan must allow this "55" thing.
And - one must be persistent in confirming this.

When I asked a representative for my 401k plan, at first they said it was not allowed because it was not allowed by 'law'.

When I persisted and showed the excerpt from the irs publication 575, I then got an apology and a confirmation that yes, my plan does allow this.
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Old 07-23-2014, 10:39 AM   #19
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you generally have to "retire" at 55
Please tell my wife

Quote:
Originally Posted by steelyman View Post
I think rbmrtn references the right thing: you can take withdrawals penalty-free from a 401(k) type plan if you leave employment in the year you turn 55, but the employer has to allow it.
I know I could do the research but I'm lazy today...If I have a 401K and roll it to an IRA does the rule still apply? Not that I will necessarily use it when I am less than 591/2 but I like to know all my options
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Old 07-23-2014, 10:54 AM   #20
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Please tell my wife



I know I could do the research but I'm lazy today...If I have a 401K and roll it to an IRA does the rule still apply? Not that I will necessarily use it when I am less than 591/2 but I like to know all my options
No. If you roll it to an IRA, you now have to wait until 59 1/2, unless you can live with the 10% withdrawal penalty.

That it is why, sometimes it is 'better' to leave your 401k where it is.
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