Question: I'm 55 and considering retirement very soon. I intend to combine my pension-plan lump sum with my 401(k), leaving the total in my current 401(k) account. I also intend to find work to supplement my retirement. Would my work plans threaten the non-penalty status of tapping into a 401(k) at age 55?
TB: Continuing to work after age 55 won't impact your right to tap into your 401(k) funds without triggering the penalty tax, as long as you are not working for the company that maintains the 401(k) where your money is held. You may work for any other company, either part or full time, without impacting your eligibility to withdraw these funds without penalty. You could even return to work with the same employer after the distribution has been reported to the IRS.
Ted Benna, creator of the first 401(k) retirement savings plan, will answer your most intriguing questions every Tuesday. With over 30 years of experience as an employee benefits consultant, Ted is a nationally recognized expert on benefits issues. He has authored two books, Helping Employees Achieve Retirement Income Security and Escaping the Coming Retirement Crisis, and is President of the 401(k) Association. Ted is a frequent speaker at meetings of 401(k) plan sponsors and participants. His articles and comments have appeared in numerous publications, including The New York Times and The Wall Street Journal.