Author Topic: 401k - "Age 55 Rule"?  (Read 917 times)

markporter

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401k - "Age 55 Rule"?
« on: November 30, 2017, 09:17:13 AM »
The "Age of 55" Rule for a 401k specifies (I believe) that, if one separates from their job at age 55 or older, they are permitted to withdraw any amount from their 401k and not pay the usual penalty for withdrawals prior to 59 1/2.  Any withdrawal is taxed at the individual's ordinary income tax rate.

Could anyone confirm this for me?  Everything I've found seems to indicate this but some have questioned if a SEPP (Substantially Equal Periodic Payment) over 5 years is instead required.  There is no question that a SEPP is a requirement if the vehicle is an IRA.  But it appears a 401k has special status with regard to early withdrawals after 55.

Appreciate any insight!

Jim

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Re: 401k - "Age 55 Rule"?
« Reply #1 on: February 21, 2018, 06:58:41 AM »
Mark,

I haven't had to be in this specific situation, but I looked on the IRS website and found this helpful link (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions).  If you scroll down on the table until the heading of "Separation from Service" it says as long as you turn 55 that year, you can withdraw from a 401k without the additional tax penalty.

I believe this has to be from your current employer's 401k and not from a 401k a couple of jobs ago (if you didn't roll it over).

I don't know how the mechanics of it work on your form 1040, but that is what I found.  Hopefully this was helpful in some way.
I've started a blog (not nearly as good as Keith's):
http://jimalism.com/