Best practices to get RIFed

[pb4uski]

Believe IRS rules for no penalty withdraw between 55-60 age only apply to a RIF situation. 10% penalty applies if fired for cause or voluntarily separation.

You believe wrong. The no penalty applies as long as you separate from service in the year that you turn 55... doesn't matter if you quit, are fired, RIFed or whatever. See below.

If you participate in a company retirement plan, such as a 401(k), there's a way you can take a distribution and get out of paying the 10% early distribution penalty if you're under age 59 ½ at the time of the withdrawal. The rule is sometimes called the “age 55 rule.”

If you are 55 years old or older in the year you left your job and you need to take a distribution of your retirement plan funds immediately, you should leave the money in your company plan and take your withdrawals from there. The reason is because distributions from your company plan, when you leave the company in the year you turn age 55 or later, are not subject to the 10% early distribution penalty if you no longer work for that company (or what the tax code refers to as “separation from service”). Remember, though, that the distribution would still be subject to federal income taxes. ...

https://www.irahelp.com/slottreport/age-55-rule-taking-money-out-company-retirement-plan

 

[Chuckanut]

Years ago I worked for a company that had experienced several bad quarters in a row at a time they were gearing up to challenge the Big Boys in our industry. There were rumors of cuts and layoffs floating around for weeks.

Finally, the execs, decided that the last thing they needed now was to have good employees fleeing the ship while the poorer employees hung on for dear life. Each manager identified the bottom 10% of the their staff and informed them that if layoffs came, they would be the ones to go.

After a few months, a big chunk of the bottom 10% had departed voluntarily for greener pastures. The business turned around and the actual 'crisis' that might have required Rifs never happened.

Note: Most of the bottom 10% were not eligible for anything other than their last pay check and any accrued vacation.

 

[ER Eddie]

The no penalty applies as long as you separate from service in the year that you turn 55... doesn't matter if you quit, are fired, RIFed or whatever. See below.

https://www.irahelp.com/slottreport/age-55-rule-taking-money-out-company-retirement-plan

Whoah, I didn't know that. I'm planning to retire at 56 or 57, have a 403b through my company, and figured I'd have to leave it alone until 59 1/2. Thanks for the info.

 

[cathy63]

Whoah, I didn't know that. I'm planning to retire at 56 or 57, have a 403b through my company, and figured I'd have to leave it alone until 59 1/2. Thanks for the info.

You need to read your plan docs to find out what kind of withdrawals it allows. Even though the IRS wouldn't penalize you, the actual types and timing of withdrawals are governed by your plan docs. You may be forced into withdrawing more than you want to, or starting an installment withdrawal plan.

 

[pb4uski]

^^^ good point. Many plans have onerous restrictions on partial withdrawals in terms of amounts and timing.

 

[Live And Learn]

However, since the last voluntary package, which was 15 months ago, megacorp has continued to make cuts and these are more strategic. By that I mean whole teams are being let go, although these cuts also include downsizing in existing teams.

True. That's why I automated as much of my job and possible and handed off other portions to other departments because it was "a better fit there than with me". I made myself redundant ... which is exactly what RIFs are for. Telling the bosses that I would be ok with a RIF just made it easier for them since they really liked me and would have easily found other work for me if I because too idle.