Have you ever heard of the "rule of 55"? That you can withdraw money out of 401K if you are over 55 and no longer working (quit and retired or laid off and retired)?
Any gotcha's?
It's such a well-known feature of many 401(k) plans that pretty much the entire early-retired kingdom knows about it. The OP must live in another kingdom.
Well, it is kind of confusing...
I've learned a lot here - that's why a person asks!
Ya know, Steely, some people were born knowing everything. The rest of us have to ask.
Ya know, Steely, some people were born knowing everything. The rest of us have to ask.
you generally have to "retire" at 55
It's such a well-known feature of many 401(k) plans that pretty much the entire early-retired kingdom knows about it. The OP must live in another kingdom.
I'm not sure one has to "retire". I believe the requirement is that you terminate employment from the employer where you have the 401K in the year you turn 55 or later, but that does not keep you from starting with another employer.
Of course, as has been stated by others, the 401K plan must allow this "55" thing.
you generally have to "retire" at 55
I think rbmrtn references the right thing: you can take withdrawals penalty-free from a 401(k) type plan if you leave employment in the year you turn 55, but the employer has to allow it.
Please tell my wife
I know I could do the research but I'm lazy today...If I have a 401K and roll it to an IRA does the rule still apply? Not that I will necessarily use it when I am less than 591/2 but I like to know all my options
No. If you roll it to an IRA, you now have to wait until 59 1/2, unless you can live with the 10% withdrawal penalty.
That it is why, sometimes it is 'better' to leave your 401k where it is.
Such withdrawals are not allowed from a 401k originating with an employer for which you stopped working before age 55.
I moved most of my 401K into a tIRA after retirement from a megacorp at 55 and before 59-1/2 with no penalty or taxes. I also made a small withdrawal with no 10% penalty at 56 (age 57 for tax year - it was my last year I could file as single head of household so I had some "room in the 15%tax bracket").
It was clear in my SDP that that this is the way my 401K worked (I also got verbal verification before I retired). I thought all 401Ks worked this way since they need to adhere to the same Govt. regulations, but I could be wrong.
I guess the only thing in the OPs post I'm not sure about is the case of quitting. But why quit at 55 if you can you can retire or get a layoff/retirement which can include various incentives.