The rule of 55?

[RobLJ]

I had to meet the state rule of 86, which I did last year. Otherwise, since I'm 55, I would roll it over to an IRA and do the 72t withdrawals mentioned early in the thread.
Sorry if this has already been mentioned--haven't read all the posts.

 

[scrabbler1]

Another consideration is if you have a significant amount of company stock that has gone up significantly in value in your 401k it might work to your advantage to calculate what the cost basis is for the stock and what kind of NUA value (taxed as a LTCG) it has. You might still make out well if you have to take a lump sum distribution because your plan doesn't allow periodic distributions. My 401k plan allows for distributions of stock held within the plan. But does not allow for periodic distributions. Worth talking to a CPA to find out if it is a good thing for your situation. YMMV

When I left my company back in 2008 (I was 45, well under 55 which can qualify for taking distributions without the 10% penalty), I chose to take my large amount of company stock using NUA (97% was NUA) so it was subject to LTCG. NUA is not subject to the 10% penalty, either, only the original cost basis. This cashout did trigger the AMT and raised the income tax bite on the rest of my income (i.e. mostly wages).

I also had some after-tax money in the plan which I had to totally liquidate as a condition of using NUA. The after-tax money was also not subject to any taxes including the 10% penalty, of course. What I ended up doing was cashing out anything which was not subject to ordinary income taxes (besides the miniscule cost basis of the company stock) and minimize the tax bite on anything else. I did a direct rollover into an IRA of all the pretax, company match, and earnings on both so there was no tax bite on that, either.

 

[foxfirev5]

Thanks good to know...I have an old company's 401K still as well (left it there because it contained a bunch of company stock and was doing well so saved me some work).

I'm not sure that they even allow the 55 withdrawl but I can check on it...or just wait a few years and it comes a mute point

For me it's not worth the hassle. I'll just wait until I'm 59 1/2 to collect. Only 501 more days and I'll take the year end bonus, cash out enough for the next year or so, keeping in the 15% tax bracket. Besides I can't even figure out how to retire officially at mega corp. There's tons of info on working and saving, HR policies, vacation, short term disability etc. But I can't find anything on actually retiring. The retiree medical that some of us still have available has become a best kept secret with nothing on the website. Don't mention the HR rep. I've found that they are less than helpful and actually dangerous at times.
Meanwhile I'll continue to slowly burnout waiting for some clarity on the subject.

 

[MJN7]

I checked with my employer and they confirmed that I could take a distribution from my 401k penalty free, but I would need to rollover the remaining balance into an IRA, in other words, I couldn't keep the 401k.

 

[MRG]

I checked with my employer and they confirmed that I could take a distribution from my 401k penalty free, but I would need to rollover the remaining balance into an IRA, in other words, I couldn't keep the 401k.

Yes it's simple; but there are many variations. First your plans SPD has to include the proper verbage per IRS regulations. Then the plan administrator(IIRC) has rules regarding how the distribution process works(that's probably your brick wall). Both have a say in if/how you can receive your funds.

I watched my Megacorp change the plan administrator rules when they wanted 'old timers' to leave the organization. YMMV fits this thread perfectly. Best wishes to you.

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