another 55 rule question

[Bigdawg]

I understand that the IRS allows a person to draw from their current 401K on or after 1 Jan in the year they turn 55 (if allowed by your company and the 401K company). If a person leaves after that date and then starts with a new company can that person theorectically draw from 2 seperate 401K's after 55 but before 59.5? What if a person had 3 or 4 companys that fit under that scenario? I am asking because I am sitting here after 1 Jan (will turn 55 in Oct) and I am thinking about changing from one 32 hrs/wk gig to another.

[Spock]

If you roll 401Ks from the old company into the new company plan, and the last company allows the 55+ policy, you're done.

[Markola]

I don’t know but I also turn 55 this year and plan to go Rule of 55, so I:
1). Got our Benefits manager to confirm that I qualify for the Rule of 55 and I saved that email on my home computer to prevent baloney later since they probably barely understood the question.

2) Plan to roll in some money to my 403b from my much larger IRA should the 403b balance run low before I turn 59.5.

3) Figure that even if I get a new j*b with a new 403b, I’ll only withdraw from my current employer’s since I know the rules. I’ve read nowhere that I have to stop withdrawing from the first if I start a new one somewhere else.

Good luck and please say so if you learn differently. This is such a rarely used loophole that experts are hard to find.

[Bigdawg]

Quote:

Originally Posted by Spock If you roll 401Ks from the old company into the new company plan, and the last company allows the 55+ policy, you're done.

makes sense. That's most likely what I would do.

[Bigdawg]

Quote:

Originally Posted by Markola I don’t know but I also turn 55 this year and plan to go Rule of 55, so I: 1). Got our Benefits manager to confirm that I qualify for the Rule of 55 and I saved that email on my home computer to prevent baloney later since they probably barely understood the question. 2) Plan to roll in some money to my 403b from my much larger IRA should the 403b balance run low before I turn 59.5. 3) Figure that even if I get a new j*b with a new 403b, I’ll only withdraw from my current employer’s since I know the rules. I’ve read nowhere that I have to stop withdrawing from the first if I start a new one somewhere else. Good luck and please say so if you learn differently. This is such a rarely used loophole that experts are hard to find.

I will let everyone know what I end up doing if I change jobs. Probably just roll previous 401K into the new one.

[ckelly78z]

I was understanding that the rule of 55 was fine for those not going back to work, and that penalties would apply for someone working another job, while collecting from the previous.

[sengsational]

Your question, as I understand it, is about having more than one 401K account, and if there would be a limitation to pull from only one 401K before 59 1/2.

I've read the IRS docs, plus many interpretations of the regulation in articles (a while back, admittedly), but I've never heard of any limitations like this.

From a practical matter, though, if you start a new 401K at an additional company, running the paycheck money through the account wouldn't do much good if you were going to yank the money out in the same tax year as the paycheck.

Now, if you were at company A, whose plan did not have the age 55 rule, and you moved to company B, where the 55 rule was allowed, you could roll your company A account into company B, then part ways with company B in the year you turn 55, and be golden.

[Markola]

Quote:

Originally Posted by Bigdawg I will let everyone know what I end up doing if I change jobs. Probably just roll previous 401K into the new one.

Nice to have options. In fact, I’d personally probably leave the $ in the old one until I fully FIREd and open up a new one at the new job. That way, you could (after verifying from a tax professional) withdraw from the old one if needed, such as if you hate the new job and leave, or if the rules at the new one don’t allow the Rule of 55. Viola, Diversification! Good luck.

[Spock]

Another point when considering consolidating 401Ks is what investment options are available in each plan.
Right now (for now?), stable value funds look attractive and some plans don't offer them.

[Markola]

As I think about it, DW are in this situation now. She left the Feds 2 years ago and started the Rule of 55 from her TSP. One year ago she started a part time job that came with a 403b and an auto-enrollment. We just got our 2019 returns back and the CPA didn’t say anything or cause us to pay a penalty...yet?[emoji15]

[Bigdawg]

Quote:

Originally Posted by Markola As I think about it, DW are in this situation now. She left the Feds 2 years ago and started the Rule of 55 from her TSP. One year ago she started a part time job that came with a 403b and an auto-enrollment. We just got our 2019 returns back and the CPA didn’t say anything or cause us to pay a penalty...yet?[emoji15]

A new twist to this question: To refresh, I have TSP, a former 401k with Vanguard and my current 401k with Fidelity. This is my 55 year. On December 12th my company loses it's contract and I will have to start with the new company that won the contract. Let's say that the 401k with the new company does not allow rulle of 55 w/draw. If I retire in say my 56 or 57 year can I reach back and draw from my Fidelity (current now) 401k because that is the 401k I have at year 55? I know I can transfer/merge the other 401k's at anytime. But, if the new employer's 401k company doesn't allow rule of 55 then I may be stuck.

I have mutiple back up plans to include solo 401k with my 1099 $ from sports officiating plus plenty of taxable. I am just trying to understand ALL of my options.

Thanks

[Markola]

Is there enough in the prior, older 401ks and TSP so that you can use them to bridge you to 59.5? I still like the cleanliness of keeping your different older accounts, rather than rolling them into your current or new one.

Is there a period of non employment between the current job’s contract and the new job in December? If there is a complete separation, that might well allow you to access the current 401k but definitely explore the rules and get it in writing from HR and the plan.

FWIW, I am 54, turning 55 later this year in 2020. I left my job in July and, after verifying with both the company and Fidelity, I filed the paper work yesterday to start recurring distributions from that 403b. I asked what would happen if I should take a new job with a new 403b plan and they said, “Nothing. There’s no bearing on this plan you have.” So you can use your old plans since you’ve separated from those employers even if the current one is off limits. To me, rolling those old ones into your current one creates risk that you’d become subject entirely to, and stuck with, the current plan’s rules, i.e. you’d have to separate from employment to access the funds. Others above seem to think differently.

[pb4uski]

Quote:

Originally Posted by Bigdawg A new twist to this question: To refresh, I have TSP, a former 401k with Vanguard and my current 401k with Fidelity. This is my 55 year. On December 12th my company loses it's contract and I will have to start with the new company that won the contract. Let's say that the 401k with the new company does not allow rulle of 55 w/draw. If I retire in say my 56 or 57 year can I reach back and draw from my Fidelity (current now) 401k because that is the 401k I have at year 55? I know I can transfer/merge the other 401k's at anytime. But, if the new employer's 401k company doesn't allow rule of 55 then I may be stuck. I have mutiple back up plans to include solo 401k with my 1099 $ from sports officiating plus plenty of taxable. I am just trying to understand ALL of my options. Thanks

I think you are all set to withdraw from the existing 401k at Fidelity since you will have left that employer's service after you turn 55. Call Fidelity to verify.

From Fidelity:

Quote:

If you no longer work for the company that provided the 401(k) plan and you left that employer at age 55 or later—but still maintain a 401(k) account—you can take early withdrawals beginning at age 55 without a penalty. You should contact your plan administrator for rules governing your plan.

https://www.fidelity.com/learning-ce...%20your%20plan.