401K - Early Withdrawl with no Penalty

[eastnortheast]

Looking to tap into the collective wisdom of the folks here.

A (somewhat) hypothetical question.

My company allows early withdrawl from the 401K plan at age 55 with no penalty as long as you retire from the company.

My question is if you can get another job - even something as benign as a part time job flipping burgers that local McDonalds? Would a person still be able to take penalty free withdrawls from the 401K or does any type of employment (with a different company) negate this?

Thanks!!

[golfnut]

You can still work without incurring a penalty.

[travelover]

Some companies require you to take it all out at once, as opposed to piece meal. Then you have to roll it over to an IRA, which has the age 59 1/2 rule. Check the rules for your specific company plan.

[David1961]

I believe the IRS gives you a tax penalty if you take it early. Not sure though

[REWahoo]

Quote:

Originally Posted by David1961 I believe the IRS gives you a tax penalty if you take it early. Not sure though

Google "401k rule of 55."

[Finance Dave]

I'm no expert, but I think you can still work at another job and get this. Just be aware that there may be no penalties, but there will be taxes...so if you take out a huge amount, you'll be at the highest tax bracket! Be careful!

Perhaps pick a tax rate you are comfortable with, then estimate your part time job income, and take out just enough from the 401k to get you up to the top of that tax bracket.

[eastnortheast]

Thanks for all the replies. I have read through and contacted our 401K plan administrator, and they confirmed that that penalty free withdrawls can be taken at age 55 (actually the calendar year in which you turn 55, so theoretically, a person could begin withdrawls at 54).

Appreciate the feedback on being able to work and still withdraw penalty free. Just something I wanted to keep in the back of my mind.

Re: taxes - good point. This is the one thing I really need to educate myself on - how best to fund retirement while minimizing taxes (i.e. withdraw from before tax accounts? after tax? etc etc). Outside of this forum, any recommendations on books etc in this area? Thanks!

[Finance Dave]

Quote:

Originally Posted by eastnortheast Thanks for all the replies. I have read through and contacted our 401K plan administrator, and they confirmed that that penalty free withdrawls can be taken at age 55 (actually the calendar year in which you turn 55, so theoretically, a person could begin withdrawls at 54). Appreciate the feedback on being able to work and still withdraw penalty free. Just something I wanted to keep in the back of my mind. Re: taxes - good point. This is the one thing I really need to educate myself on - how best to fund retirement while minimizing taxes (i.e. withdraw from before tax accounts? after tax? etc etc). Outside of this forum, any recommendations on books etc in this area? Thanks!

Here is a good article...

https://www.fidelity.com/viewpoints/...vy-withdrawals

I intend to follow strategy 2. Don't just assume you fall into the "typical" category. Most articles you will read assume that you'll work until 65 and that you'll spend in retirement about what you were making before retirement....which is not the case for us. We saved 30-35% of our net income for most of our working years...and will retire in our late '50s...so none of the "standard" philosophies work for us.

[travelover]

Quote:

Originally Posted by eastnortheast .........Re: taxes - good point. This is the one thing I really need to educate myself on - how best to fund retirement while minimizing taxes (i.e. withdraw from before tax accounts? after tax? etc etc). Outside of this forum, any recommendations on books etc in this area? Thanks!

If you have a substantial portion of your retirement assets in tax sheltered IRAs or 401(k)s, watch out for the RMD tax torpedo. Many of us are delaying Social Security to age 70 and RMDs start at age 70 1/2. This can throw you back into a high tax bracket. So, it may benefit you to draw down your tax sheltered accounts first either for living expenses or through Roth conversions. The Bogleheads Retirement book is a good one.

[GravitySucks]

Yes you can. I retired at 54 using the rule of 55 and worked a whole four weeks since then.

[eastnortheast]

Quote:

Originally Posted by GravitySucks Yes you can. I retired at 54 using the rule of 55 and worked a whole four weeks since then.

I like your style!!!!