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Withdrawal from 401k at age 56
Old 10-16-2007, 04:47 PM   #1
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Withdrawal from 401k at age 56

My first post.

I retired at age 56 on June 1, 2007. I would like to begin annual 401k withdrawals to supplement my pension income. My 401k is still with my old employer who doesn't allow withdrawals so I know I have to convert to an IRA but here's where the confusion starts.

In order to withdraw money penalty free do I have to use the 72t rules or can I withdraw money as if I was age 59 1/2 ?

If I have to use the 72t rules can I do an annual withdrawal in December of 2007 and do a second annual withdrawal in January of 2008 ?

Thanks in advance. Glad I found this great forum.
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Old 10-16-2007, 05:01 PM   #2
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Are you certain that your employer does not allow withdrwals for RETIRED workers ?

That sort of defeats the purpose doesn't it ?

If you must do a lump sum 401K withdrawal, then yes you'd roll it over into an IRA and then use the 72T rules to make withdrawals. Once you are in an IRA the IRA rules apply and therefore to get money out penalty free you are required to do the 72T thing.
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Old 10-16-2007, 05:17 PM   #3
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If you haven't already, get a copy of the Summary Plan Description and carefully read it for yourself. Don't rely on some HR clerk to tell you. As far as the IRS is concerned, given your age at which you left employment you should be able to take distributions at any schedule without penalty. But the Plan rules also apply.
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Old 10-16-2007, 05:25 PM   #4
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That's what I thought but I read somewhere that if you fully retire at or after age 55 you don't need to use 72t for penalty free withdrawals. I quess that's only if your employer allows 401k withdrawals which mine definately doesn't.

Do you know if I can do an annual 72t withdrawal for 2007 in December and do the 2008 withdrawal in January ?

Thanks
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Old 10-16-2007, 05:46 PM   #5
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Quote:
Originally Posted by ssdsco View Post
That's what I thought but I read somewhere that if you fully retire at or after age 55 you don't need to use 72t for penalty free withdrawals. I quess that's only if your employer allows 401k withdrawals which mine definately doesn't.

Do you know if I can do an annual 72t withdrawal for 2007 in December and do the 2008 withdrawal in January ?

Thanks

72(t) can be complicated beasts, with harsh penalties for those who screw up. The best source of information is Welcome to 72t on the Net. At a minimum you'll want to fork over the $55-$75 for the 150 page report. (Great for curing sleepless nights also) or go to your friendly CPA who has experience with 72(t). This is all an important disclaimer to answer your question yes you can take money for 2007 in Dec and 2008 in Jan.

Now having said that I'd invest a bit of energy in convincing your old company to change the plan to allow withdrawal for employees over 55. Assuming you still have friends in reasonably high place at the old place tell them it is big benefit to their employees to allow such a change, and shouldn't cost them much money.
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Old 10-16-2007, 05:57 PM   #6
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Quote:
Originally Posted by ssdsco View Post
That's what I thought but I read somewhere that if you fully retire at or after age 55 you don't need to use 72t for penalty free withdrawals. I quess that's only if your employer allows 401k withdrawals which mine definately doesn't.
So when does your employer allow 401k plan withdrawals?

Another thought, if you can rollover you 401k in a lump, you could find another job for tempoaray employment that has a "good" 401k (with withdrawal rules/investment options, etc that are to you're liking), then roll your old 401k into the new 401k. Then re-retire and start periodic withdrawals from the new 401k.
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Old 10-16-2007, 06:00 PM   #7
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My 401k plan does allow early withdrawals at 55. The catch is it's all-or-nothing...

Not particularly useful...
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Old 10-16-2007, 06:17 PM   #8
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My plan doesn't even allow hardship withdrawals for retirees. All or nothing. I'll go the 72t route as that was the plan all along. Guess I gotta hire a CPA.

Thanks
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Old 10-16-2007, 07:31 PM   #9
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Is any part of your 401(k) funded with after-tax $$? If so, when you roll over your 401(k) into an IRA, you should be able to take those after-tax dollars out without penalty or without using rule 72T
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