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11-27-2006, 06:19 AM
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#1
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Dryer sheet wannabe
Join Date: Jul 2006
Posts: 24
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Rule of 55
I retired this year at the age of 55. I have heard that the rule of 55 says I can withdraw any 401k or Ira money I want. Does this mean anytime from now on or just this year? And if I want to do this now or later how do I show this rule applies.
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11-27-2006, 06:36 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Re: Rule of 55
 Quote:
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Originally Posted by sooner
I retired this year at the age of 55. I have heard that the rule of 55 says I can withdraw any 401k or Ira money I want. Does this mean anytime from now on or just this year? And if I want to do this now or later how do I show this rule applies.
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The IRS allows you to withdraw funds penalty free from a 401k, not an IRA. The rules are a bit tricky. Here is some of what Greaney over at The Retire Early Home Page has to say about it:
[url=http://www.retireearlyhomepage.com/wdraw59.html] "You can make penalty-free withdrawals from a 401(k) at age 55. You must wait until age 59 1/2 to make penalty-free withdrawals from an IRA....[however] Your employer must make it convenient for an ex-employee to make retirement withdrawals, many employers can't be bothered...
Note: There is one fine point that many people miss in taking penalty-free withdrawals from a 401k at age 55. To do so, you must terminate your employment no earlier that the year in which you turn age 55. (See IRS Notice 87-13)..."
__________________
Numbers is hard
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11-27-2006, 06:44 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2004
Posts: 2,670
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Re: Rule of 55
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Originally Posted by REWahoo!
The IRS allows you to withdraw funds penalty free from a 401k, not an IRA.
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What about Sec. 72(t)?
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
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11-27-2006, 07:04 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Re: Rule of 55
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Originally Posted by retire@40
What about Sec. 72(t)?
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Yes, he can go that route and use IRS Section 72(t)(2)(a)(iv)) to avoid the 10% penalty tax if he takes "substantially equal periodic payments" (SEPP) from an IRA. I was responding to his "Rule of 55" question, not what other options he might have.
__________________
Numbers is hard
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11-27-2006, 08:45 AM
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#5
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Recycles dryer sheets
Join Date: Oct 2003
Posts: 452
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Re: Rule of 55
Retiring at age 55 allows you to take periodic equal payments from your 401k with no penalty. You do not have to use the 72t method.
You do have to pay Fed tax though.
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11-27-2006, 10:29 AM
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#6
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Re: Rule of 55
Rule 55 is good for FIRE folks, no?? 
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Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
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11-29-2006, 06:36 AM
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#7
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Dryer sheet wannabe
Join Date: Jul 2006
Posts: 24
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Re: Rule of 55
[quote=bennevis ]
Retiring at age 55 allows you to take periodic equal payments from your 401k with no penalty.
What do you mean periodic equal payments? Can I Just take an amount once a year. Can I change that amount?
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11-29-2006, 08:14 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
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Re: Rule of 55
[quote=sooner ]
Quote:
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Originally Posted by bennevis
Retiring at age 55 allows you to take periodic equal payments from your 401k with no penalty.
What do you mean periodic equal payments? Can I Just take an amount once a year. Can I change that amount?
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Yes you can, to both your questions. Again, remember that you have to terminate your employment in or after the year you turn 55 for this exception to the penalty. See IRS publication 575:
http://www.irs.gov/pub/irs-pdf/p575.pdf
Coach
__________________
"Comprehensive health insurance is an idea whose time has come in America." President Richard M. Nixon, February 6, 1974
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