Hi, wanting to retire next year at 55

[CRbound]

I would like to retire next year. I turn 55 in May but would like to retire in Jan and pull from my 401k. According to IRS pub 575, I think it says you can do this without the 10% penalty as long as you leave your company in the year you turn 55 and keep your money in the 401k. You can take withdrawls without limits dependant on the rules of the 401k. My question is this: Can I retire in Jan and take the withdrawls even before I turn 55? I have seen several misleading quotes that are confusing me.

 

[pb4uski]

You need to check with your 401k administrator or your employer. Not all 401k plans allow penalty free withdrawals if you terminate service after age 55. In my experience some do and some do not. If yours does not it would blow up your retirement plans.

For those 401k plans that do allow it, I thought you needed to be 55 when you terminate but it may well be the year you turn age 55 as you indicate.

 

[Brett_Cameron]

The wording of the regulations state that you can but you need to study the 401k Summary Plan Description and talk to them to see if they have a mechanism that will suit your needs.

I started withdrawals from my 401k when I retired from megacorp at age 55 1/2. Megacorp's policy was if I wanted to keep the 401k and not roll over into an IRA AND wanted to withdraw money, I had to specify a duration over which to withdraw the money. I specified a 15 year period and the first payment was 1/180th the balance, second payment was 1/179th the balance and so forth. I chose the 15 year period to ensure I could bridge the gap to 59 1/2. I plan to roll over to IRA at 59 1/2.

 

[golfnut]

The wording of the regulations state that you can but you need to study the 401k Summary Plan Description and talk to them to see if they have a mechanism that will suit your needs.

I started withdrawals from my 401k when I retired from megacorp at age 55 1/2. Megacorp's policy was if I wanted to keep the 401k and not roll over into an IRA AND wanted to withdraw money, I had to specify a duration over which to withdraw the money. I specified a 15 year period and the first payment was 1/180th the balance, second payment was 1/179th the balance and so forth. I chose the 15 year period to ensure I could bridge the gap to 59 1/2. I plan to roll over to IRA at 59 1/2.

Wouldn't a 15 year period bridge the gap to age 70 (from 55)?

 

[Brett_Cameron]

Wouldn't a 15 year period bridge the gap to age 70 (from 55)?

Yes. I chose the duration to have enough monthly income to meet my projected expenses during this time frame (with margin) because I had only one shot at setting this up. My 401k plan specifies that once a distribution plan is established any change would trigger a mandatory lump sum distribution. My intention is to stop this distribution sequence and roll over to an IRA so I can reduce my withdrawals to match spending.

 

[golfnut]

Yes. I chose the duration to have enough monthly income to meet my projected expenses during this time frame (with margin) because I had only one shot at setting this up. My 401k plan specifies that once a distribution plan is established any change would trigger a mandatory lump sum distribution. My intention is to stop this distribution sequence and roll over to an IRA so I can reduce my withdrawals to match spending.

Thanks for the explanation.