Rule of 55 exact date?

[Biracialgirlie]

I cannot find any specifics online answering my question … the rule says that I can avoid the 10 percent penalty when. I take my 401k from my current job “within the CALENDAR YEAR that you turn 55” . My question is : if I turn 55 on June 1, 2026… may I take my money out on January 1 of 2026 OR IS IT on the day of my birthdate in June? THANK YOU IN ADVANCE, MY FIRE FRIENDS!!!!!

[latexman]

I’d call your 401k administrator.

[Biracialgirlie]

Thanks latexman

[tulak]

It's the year you turn 55 per the IRS, under 'Exceptions to the 10% Additional Tax':

Quote:

Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental benefit plan, as defined in section 414(d) if you were a qualified public safety employee (federal state or local government) who separated from service in or after the year you reached age 50.

https://www.irs.gov/taxtopics/tc558

I would check with your 401k administrator to make sure they support withdrawals at 55. Not all plans do.

[rodi]

Quote:

Originally Posted by tulak I would check with your 401k administrator to make sure they support withdrawals at 55. Not all plans do.

This!

[Biracialgirlie]

Thanks rodin& tulak

[SecondCor521]

It would be January 1, 2026 when you are actually only 54 5/12.

Your employer is required by federal law to allow you to utilize the rule of 55. However, plans are able to place restrictions - for example, some plans say that you are limited to cashing out the entire amount at one time.

You can call your administrator who should know, or you can ask for a copy of the plan document and read through it yourself. Most do, but some plan administrators don't know the rules of their own plan.

[Biracialgirlie]

Quote:

Originally Posted by SecondCor521 It would be January 1, 2026 when you are actually only 54 5/12. Your employer is required by federal law to allow you to utilize the rule of 55. However, plans are able to place restrictions - for example, some plans say that you are limited to cashing out the entire amount at one time. You can call your administrator who should know, or you can ask for a copy of the plan document and read through it yourself. Most do, but some plan administrators don't know the rules of their own plan.

I WILL DEFINATELY CONFIRM BEFORE, BUT I WAS ACTUALLY JUST TRYONG TO GET AM IDEA!!! You gave me suchhh a nice peace of mind because I am beginning a new job on Monday after 5 months unemployed and I’m kinda dreading it and was hoping to also start a new 401k, so that I can utilize that rule of 55 and then just quit and cash out ASAP until I can tap into my previous employers 401k at 59.5… 😀😀😀🤓🤓🤓🙏🏽🙏🏽🙏🏽Thank you for taking the time to read and reply!!!

[lordjust]

Quote:

Originally Posted by Biracialgirlie I WILL DEFINATELY CONFIRM BEFORE, BUT I WAS ACTUALLY JUST TRYONG TO GET AM IDEA!!! You gave me suchhh a nice peace of mind because I am beginning a new job on Monday after 5 months unemployed and I’m kinda dreading it and was hoping to also start a new 401k, so that I can utilize that rule of 55 and then just quit and cash out ASAP until I can tap into my previous employers 401k at 59.5… 😀😀😀🤓🤓🤓🙏🏽🙏🏽🙏🏽Thank you for taking the time to read and reply!!!

Definitely ask for the documentation and read it yourself after speaking to the plan "expert". I had a plan administrator tell me i couldn't withdraw from my 457 without IRS penalty even though I had left the company many years back. I didnt push him on it but I did say that his information is different than what I read several times on the IRS website. He insisted he was correct so.... take the verbal information with a grain of salt.

[SecondCor521]

Quote:

Originally Posted by Biracialgirlie I WILL DEFINATELY CONFIRM BEFORE, BUT I WAS ACTUALLY JUST TRYONG TO GET AM IDEA!!! You gave me suchhh a nice peace of mind because I am beginning a new job on Monday after 5 months unemployed and I’m kinda dreading it and was hoping to also start a new 401k, so that I can utilize that rule of 55 and then just quit and cash out ASAP until I can tap into my previous employers 401k at 59.5… 😀😀😀🤓🤓🤓🙏🏽🙏🏽🙏🏽Thank you for taking the time to read and reply!!!

One strategy you can try that might be helpful in your scenario:

If they allow it (many do), roll your previous employer's 401(k) into your new employer's 401(k). If you then separate from service in the year you turn 55, then you'd have access to all of those funds in that year.

This would accelerate your penalty-free access to your previous employer's 401(k) funds by 4.5 years (59.5 - 55).

[Biracialgirlie]

Quote:

Originally Posted by lordjust Definitely ask for the documentation and read it yourself after speaking to the plan "expert". I had a plan administrator tell me i couldn't withdraw from my 457 without IRS penalty even though I had left the company many years back. I didnt push him on it but I did say that his information is different than what I read several times on the IRS website. He insisted he was correct so.... take the verbal information with a grain of salt.

THANK U! I will :-)