Using Age 55 Rule to get from 55 to 59.5

[43210]

^ Being out of the market and missing an upswing (if stocks are liquidated rather than bonds/cash).

 

[Swordplay Charlie]

This is why it is crucial to actually read what's in the SPD. I've had the same thing happen because the custodians benefit person is dealing with many plans and sometime the details vary from one employer to another. They'll give you a pat answer without checking so I sometimes need to have a copy of the SPD handy and direct them to the section that permits funds specific transactions, for example. Happens with other features too. Our custodian is Fido so not a small time outfit.

Just read thru my SPD and nowhere in there does it say how funds will be sold. Also remembered that when I called my 401k help line that there wasn't any questions as to who I was, my account or anything like that. So how would they know anything about what I was asking?

 

[bobandsherry]

^ Being out of the market and missing an upswing (if stocks are liquidated rather than bonds/cash).

Unless the plan is really restrictive, one only needs to monitor the plan and when withdrawal shows initiate a transaction to rebalance funds. Doubtful that one or two days is going to really cause "damage". Also equally a possibility that timing is such that you miss a drop in the market and come out ahead.

 

[jazz4cash]

Just read thru my SPD and nowhere in there does it say how funds will be sold. Also remembered that when I called my 401k help line that there wasn't any questions as to who I was, my account or anything like that. So how would they know anything about what I was asking?

There is another document that goes into further detail. Ours is called participant guide or prospectus, I think. Unless it says somewhere that pro-rata transactions are mandatory, I think you should be able to specify. If not, you would need to re-balance to keep your AA in line.

If the line you called was for your specific plan, it may not be necessary to identify yourself. If it's a custodian line that serves multiple employers, they would at least need to know who you work for.

 

[pb4uski]

^ Being out of the market and missing an upswing (if stocks are liquidated rather than bonds/cash).

You can rebalance the same day that you do the withdrawal and take your chances.

OTOH, it could work out to your benefit too... you could be out of the market during a correction.

 

[MRG]

There is another document that goes into further detail. Ours is called participant guide or prospectus, I think. Unless it says somewhere that pro-rata transactions are mandatory, I think you should be able to specify. If not, you would need to re-balance to keep your AA in line.

If the line you called was for your specific plan, it may not be necessary to identify yourself. If it's a custodian line that serves multiple employers, they would at least need to know who you work for.

+1

Lines can get you to the right people. Same thing with zip codes. If you send smail in, especially to multiple fund companies, pay attention to the full address.

Post office will deliver pallets of mail to specific zip codes. It's very interesting to see how companies depend and use that to their advantage.

 

[brucethebroker]

OP -
You could also over the next few years find a free (no cost if not used) HELOC assuming you own your own home, as you could tap that when retired to cover some of the needed money cost. Paying a low interest rate is better than paying a 10% penalty. Then once you retire, repay it from withdrawals from the IRA, here the issue is you will be pushed into higher tax bracket to pay it off in a few years.

1+ on the HELOC-a good idea even if you DON'T plan on using it.

Have you considered PT employment you might enjoy during that time? Maybe take a 3 month breather first, before beginning? That would take a lot of pressure off. 4 years of PT doing something you like would be easy enough.

 

[Backpacker]

^ Being out of the market and missing an upswing (if stocks are liquidated rather than bonds/cash).

I was pondering more about withdrawals and my plan allows monthly payments. I had thought to do annual, but monthly would be like dollar cost averaging on the way out.

Man! I've got a lot to think about regarding the switch from savings mode to spend mode!

 

[pb4uski]

^^^ This is not an issue for us as we keep ~5% cash in taxable accounts and that is what we live on.... withdrawals could then be annually to replenish the 5% in cash in concert with rebalancing our AA.

You could do something similar and save a lot of brain cells.

 

[purplesky]

1+ on the HELOC-a good idea even if you DON'T plan on using it.

Have you considered PT employment you might enjoy during that time? Maybe take a 3 month breather first, before beginning? That would take a lot of pressure off. 4 years of PT doing something you like would be easy enough.

The OP is definitely taking potential big future money off the table by withdrawing his 401k early to retire at age 55. That 1.2 million should ride and be doubled?

Sure seems like there would be a better way to avoid this. I agree on a part time job or anything that helps avoid touching that 401k that took many years of work to accumulate.

I am guessing their pensions are solid but these days is any pension something to feel completely safe about?

I know its 54 months of freedom so its worth it. But killing that 401k so quickly with a pension available would bother me.

 

[dvalley]

Great topic, thanks for posting OP. My retirement age/amount will be pretty much what you're targetting.

Note to self: make sure to have at least 5yrs of after-tax savings/cash and then start converting IRA to ROTH each year.

 

[brainsagolfer]

IRS reform needed

SO like many i have chucked a bunch of $ in 401k's of all of my employers. I worked 20 years for one Co, then 6 years, and presently 5 years. I now have what i think may be enough saved to retire early- But of course it is not that easy.
Since i have the 1.3 mil in a IRA (rollover from previous employers) i can only access THAT $ with a 72t, since i am 55.5 YO. BUT if i had that amount in my present employers 401k, they would let me access as much as i want.

WEIRD that the Gubmint would have such different rules....

It seems almost everyone on this site hates the idea of a 72t, but what if you switch employers your whole career and end up with 1.5 mil in an ira, but only 150K in your present employer 401k when you are 56?

I like the 72t idea, but i think the penalty for over withdrawal should be amended. Maybe tell me- hey you took 100 $ too much, We have to penalize you 500$, and you have to return the 100$- makes sense, NO?

I also think the 72t should be able to be used as a bridge to 59.5- why does it have to be 59.5 years old or 5 years - whichever is LONGER?

I have seen a lot of people from my first employer ER after 55 with the 401k exception- sucks i dont have the same option even though i am probably in the same financial position.

 

[Pilot2013]

SO like many i have chucked a bunch of $ in 401k's of all of my employers. I worked 20 years for one Co, then 6 years, and presently 5 years. I now have what i think may be enough saved to retire early- But of course it is not that easy.
Since i have the 1.3 mil in a IRA (rollover from previous employers) i can only access THAT $ with a 72t, since i am 55.5 YO. BUT if i had that amount in my present employers 401k, they would let me access as much as i want.

WEIRD that the Gubmint would have such different rules....

It seems almost everyone on this site hates the idea of a 72t, but what if you switch employers your whole career and end up with 1.5 mil in an ira, but only 150K in your present employer 401k when you are 56?

I like the 72t idea, but i think the penalty for over withdrawal should be amended. Maybe tell me- hey you took 100 $ too much, We have to penalize you 500$, and you have to return the 100$- makes sense, NO?

I also think the 72t should be able to be used as a bridge to 59.5- why does it have to be 59.5 years old or 5 years - whichever is LONGER?

I have seen a lot of people from my first employer ER after 55 with the 401k exception- sucks i dont have the same option even though i am probably in the same financial position.

If you are still employed, and your employer has a 401k program, I think you can roll any required retirement funds over to the 401k plan? Worth a check, then you could have all funds in one (current employer) 401k, retire, and use the Rule of 55.

As I am sure lot of people will point out, you need to check the SPD of the current employer 401k plan to make sure about withdrawal frequency, etc.

 

[pb4uski]

+1 many 401k plans allow active employees to roll in money from a tIRA to the employer's 401k.

https://www.nerdwallet.com/blog/investing/rollover-ira-to-401k/

 

[brainsagolfer]

+1 many 401k plans allow active employees to roll in money from a tIRA to the employer's 401k.

https://www.nerdwallet.com/blog/investing/rollover-ira-to-401k/

I was trying so hard to figure out how to get the $ OUT of my present employer 401k that i had not thought of the reverse. I need to check the plan to see if i can take distributions VS lump sum from their plan.

The unfortunate thing is, none of my Mega Corp funds beat the S&P - but the Trowe price funds from my IRA are crushing the S&P- so i may just have to ....sigh....... sigh again......wait a few years

 

[RE2Boys]

I was trying so hard to figure out how to get the $ OUT of my present employer 401k that i had not thought of the reverse. I need to check the plan to see if i can take distributions VS lump sum from their plan.

The unfortunate thing is, none of my Mega Corp funds beat the S&P - but the Trowe price funds from my IRA are crushing the S&P- so i may just have to ....sigh....... sigh again......wait a few years

Stop putting money into 401k above the match amount and start building up after tax savings that could be used to tied you over to 59.5.

 

[pb4uski]

^^^^^ good idea