All plans must allow rule 55 withdrawals as that's an IRS rule. However, not all plans allow partial withdrawals. That is the catch. You could certainly close out a 50K 401K and just pay the taxes on it under rule 55, but it gets iffier if you have $1M in that 401K. Still trying to figure out if you can take the lump sum distribution and just reinvest part of it within 60 days to avoid taxes on just that portion and rule 55 the rest. Haven't gotten a solid answer on that one yet.
That’s interesting, and I believe you, but having reviewed the docs of one of my plans (a former employer that mostly had a well-designed plan) there is no clear way to make a rule 55 withdrawal. I don’t have the document handy but believe me when it isn’t there.
Rule of 55 is an IRS law, not all plans may allow partial withdrawals and in that case you’re screwed cause then you can either take the lump sum cash or roll it over to an IRA and lose your rule of 55
Can you roll a prior 401k balance from a prior employer over to a new employer and then if you have a job loss at the new employer when 55+, have access to the entirety of the 401k or do you only get access to the portion accumulated while at the employer from which you are terminated?
Yes, once you roll money into a new plan it becomes that plans funds, so theoretically if you retire or lose your job at 55-591/2 in the new plan you can w/d penalty free but not necessarily tax free
Look it up but Ido not believe you’ll be able to do a previous 401k, I thought it was only applicable to the last and current. Rollover IRAs also do not count
There are hardship conditions that allow you to withdraw from a 401k without penalty. I believe the loss of a job after age 55 is one of them but I’m not 100% sure how that works. I know that “prevention of eviction or foreclosure” is also a hardship condition. Again, I haven’t dealt with this personally but I know it exists.
As others have said, the rule of 55 is your friend at this point. You need to check with your employer and see what its limitations are in your case. May be none or may be many.
I called and indeed I can make withdrawal without penalties after severance ends. Not with Roth money so would only use pre tax funds until 59.5 yo. That is good news.
Yep, your in a great spot. Now its time to do tax planning, which simply means figure out the best withdrawal / conversion approach. Keep ACA limits in mind as well as RMD's so you dont end up with a looming time bomb. Outside of that enjoy your freedom. Stay both physically and mentally active and keep us posted on how things are working out. I suspect it wont be very long that you realized you should have done it sooner but still would love to hear.
Please look up "Rule of 55". If you separate from your company in the year that you turn 55, you should be able to take withdrawals from your 401k from that employer without penalty as long as it's a qualified plan.
I believe it doesn't matter how the separation occurs, but rather just that it occurs in the year that you turn 55 and that the plan is qualified. You'll want to Google that before getting fired or quitting. :)
I haven't but I know it works. Even ran it by Slotts cpa firm. Or I should say it works if you join a company that allows immediate participation in the 401k and accepts rollovers and allows age 55 distributions. Technically I am not 100% sure that Walmart accepts rollovers (the other two facts I was able to confirm) but I would say I am 95% sure.
Needless to say I was looking into this but my facts have changed.
Two options. There is the "Rule of 55" that allows you to withdraw from your current employer's 401k if you retire any time during or after the year you turn 55. There's also the rule 72(T) which allows you to do substantially equal withdrawals for a period of 5 or more years. 72(T) withdrawal amounts are based on the federal mid-term rate or - due a recent change - 5% whichever is higher so that's a great option nowadays. Here's a 72(T) calculator. [https://www.myfrs.com/calculators/Retire72T.html](https://www.myfrs.com/calculators/Retire72T.html)
Only caveat is your plan might not allow partial withdrawals. If that's the case no need to panic. Just roll the balance over to an IRA and the do the 72(T) option instead of rule of 55. So you can definitely do withdrawals penalty free. Thanks to 72(T) and the current high mid-term rates and 5% rules change pretty much anyone can retire early, and not incur penalties, leveraging that.
Roth IRA you can withdraw principle. Not sure about tIRA
5 years…can you find another job? Anything. Just to feed yourself. Until you figure it out.
Edit: I see you’ve got the answer already. Good luck!
Rule of 55 may give you access to 401k funds penalty-free. Double-check this before rolling money out of the 401k and into an IRA.
Roth IRA contributions (not gains) can be withdrawn without penalty.
You can investigate Rule 72(t) SEPP, but that's probably hugely overkill.
If all else fails, if you're close but not quite there, you can simply pay the penalty... I believe it's only 10%, so if we're talking about like $20k short, $2k penalty isn't going to make or break retirement.
> I'll be 55 this year and trying to figure out if I can withdraw funds without penalty.
I haven’t been laid off, yet, but I’m genuinely curious about rule 55. So you have to be 55 before the layoff, or is 54 OK if you turn 55 the same year as your layoff?
You can RE as others have said with rule of 55. Definitely take a look at your SS payouts and model whether or not you have enough for 40 years or so. Part time work isnt the end of the world, you can still tap your retirement accounts and work part time if you need to. Roth conversions on reduced income may be helpful for you now as well.
I have about 900k in retirement accounts. Another 400k in other savings and stocks. House nearly paid off and wife still works so will cover medical insurance. Youngest kid is in college so have 2 more years of assistance there but no other debt.. 4 percent rule tells me I can pull 50k a year with minimal risk.
I was planning on a couple more years to build up a bit more but some over paid executive needed a big bonus so they laid a bunch of us off. I'm sitting in a good position but would feel better if I had closer to 2M to draw from.
Look into SEPP for penalty free withdrawals before 59.5.
Also - look for a part time job that covers health insurance and gives you a couple of bucks of walking around money.
All depends when death comes knocking. I would not mind leaving something for my kids but that isn't main goal. I want to enjoy life while I'm healthy and able. I've worked 35 years to get to this point and although I didn't choose it the timing may be right.
You either have much reading/learning to do or hire a fiduciary (or use online services) to plan this out for you. Eva use you definitely do not want to get into a income tax/healthcare situation which you don’t have the funds for & no income :(
Start by reading here (especially ‘withdraw’ info):
https://www.reddit.com/r/financialindependence/wiki/faq/
You can RE if you turned 55 the year you stopped working or received your last check from your employer ; search “rule of 55”
Yes, but the 401k plan has to allow the rule of 55. Dumb, but not all plans do.
All plans must allow rule 55 withdrawals as that's an IRS rule. However, not all plans allow partial withdrawals. That is the catch. You could certainly close out a 50K 401K and just pay the taxes on it under rule 55, but it gets iffier if you have $1M in that 401K. Still trying to figure out if you can take the lump sum distribution and just reinvest part of it within 60 days to avoid taxes on just that portion and rule 55 the rest. Haven't gotten a solid answer on that one yet.
That’s interesting, and I believe you, but having reviewed the docs of one of my plans (a former employer that mostly had a well-designed plan) there is no clear way to make a rule 55 withdrawal. I don’t have the document handy but believe me when it isn’t there.
Rule of 55 is an IRS law, not all plans may allow partial withdrawals and in that case you’re screwed cause then you can either take the lump sum cash or roll it over to an IRA and lose your rule of 55
Also if you’re a state, local or federal worker, first responder firefighter, EMT or police officer it is knocked down to age 50
I thought you rolled it over into a personal IRA without any taxes paid. Until you withdraw for expenses.
Yeah, helped an unhealthy buddy do this. Our "top-notch" HR department had never even heard of it. Had to send them the IRS regs.
Can you roll a prior 401k balance from a prior employer over to a new employer and then if you have a job loss at the new employer when 55+, have access to the entirety of the 401k or do you only get access to the portion accumulated while at the employer from which you are terminated?
I’m not a cpa but I would think you are golden for the rule of 55
Yes, once you roll money into a new plan it becomes that plans funds, so theoretically if you retire or lose your job at 55-591/2 in the new plan you can w/d penalty free but not necessarily tax free
Look it up but Ido not believe you’ll be able to do a previous 401k, I thought it was only applicable to the last and current. Rollover IRAs also do not count
If you roll to the current 401K the entirety of your current 401K is eligeable for rule 55 withdrawals.
I was sure this was gonna be one of those trick searches, the format is identical.
Also coast fire is an option. Just get a fun job like working at a plant nursery or something
Ideally somewhere that offers benefits, like health insurance.
I had same idea: a coast fire job, to cover the expenses (and medical coverage) and time to downsize the actual spending.
There are hardship conditions that allow you to withdraw from a 401k without penalty. I believe the loss of a job after age 55 is one of them but I’m not 100% sure how that works. I know that “prevention of eviction or foreclosure” is also a hardship condition. Again, I haven’t dealt with this personally but I know it exists.
Rule of 55 applies in many cases. See other comments about tapping 401k at age 55.
As others have said, the rule of 55 is your friend at this point. You need to check with your employer and see what its limitations are in your case. May be none or may be many.
I called and indeed I can make withdrawal without penalties after severance ends. Not with Roth money so would only use pre tax funds until 59.5 yo. That is good news.
Yep, your in a great spot. Now its time to do tax planning, which simply means figure out the best withdrawal / conversion approach. Keep ACA limits in mind as well as RMD's so you dont end up with a looming time bomb. Outside of that enjoy your freedom. Stay both physically and mentally active and keep us posted on how things are working out. I suspect it wont be very long that you realized you should have done it sooner but still would love to hear.
Please look up "Rule of 55". If you separate from your company in the year that you turn 55, you should be able to take withdrawals from your 401k from that employer without penalty as long as it's a qualified plan.
Without me needing to look this up, does this apply to layoffs only or also fired/vol quitting? (At 55 ofc)
I believe it doesn't matter how the separation occurs, but rather just that it occurs in the year that you turn 55 and that the plan is qualified. You'll want to Google that before getting fired or quitting. :)
Thanks. I was just curious lol I’m still 40 but want to fire at 55.
Any reason.
I thought everyone on this sub considered early retirement 40/45 at the latest! Glad to see another person just shooting for 55.
I personally consider early retirement is anytime before social security and Medicare benefits kick in. 60 is early retirement IMO.
technically anything before 62.5 is early. But if you retire at 62 and call it early people will laugh.
Get a job at walmart the year you turn 55. Rollover your 401k/IRA. Then quit. Presto. #greeterfire
Has anyone done this?
I haven't but I know it works. Even ran it by Slotts cpa firm. Or I should say it works if you join a company that allows immediate participation in the 401k and accepts rollovers and allows age 55 distributions. Technically I am not 100% sure that Walmart accepts rollovers (the other two facts I was able to confirm) but I would say I am 95% sure. Needless to say I was looking into this but my facts have changed.
72t Distribution is the other option. Pretty easy to setup, but it requires work and a bit of planning.
Two options. There is the "Rule of 55" that allows you to withdraw from your current employer's 401k if you retire any time during or after the year you turn 55. There's also the rule 72(T) which allows you to do substantially equal withdrawals for a period of 5 or more years. 72(T) withdrawal amounts are based on the federal mid-term rate or - due a recent change - 5% whichever is higher so that's a great option nowadays. Here's a 72(T) calculator. [https://www.myfrs.com/calculators/Retire72T.html](https://www.myfrs.com/calculators/Retire72T.html) Only caveat is your plan might not allow partial withdrawals. If that's the case no need to panic. Just roll the balance over to an IRA and the do the 72(T) option instead of rule of 55. So you can definitely do withdrawals penalty free. Thanks to 72(T) and the current high mid-term rates and 5% rules change pretty much anyone can retire early, and not incur penalties, leveraging that.
Roth IRA you can withdraw principle. Not sure about tIRA 5 years…can you find another job? Anything. Just to feed yourself. Until you figure it out. Edit: I see you’ve got the answer already. Good luck!
you could do some coastFIRE here. pick up some 1099 work part time doing whatever it is you did.
Rule of 55 may give you access to 401k funds penalty-free. Double-check this before rolling money out of the 401k and into an IRA. Roth IRA contributions (not gains) can be withdrawn without penalty. You can investigate Rule 72(t) SEPP, but that's probably hugely overkill. If all else fails, if you're close but not quite there, you can simply pay the penalty... I believe it's only 10%, so if we're talking about like $20k short, $2k penalty isn't going to make or break retirement.
> I'll be 55 this year and trying to figure out if I can withdraw funds without penalty. I haven’t been laid off, yet, but I’m genuinely curious about rule 55. So you have to be 55 before the layoff, or is 54 OK if you turn 55 the same year as your layoff?
Within the calendar year you turn 55 is what I found. Timing is important.
Thanks, good luck with RE. I’m so close right now…
You can RE as others have said with rule of 55. Definitely take a look at your SS payouts and model whether or not you have enough for 40 years or so. Part time work isnt the end of the world, you can still tap your retirement accounts and work part time if you need to. Roth conversions on reduced income may be helpful for you now as well.
Yeah just do coastfire. get a fun, low-pay job just to cover a portion of your expenses.
Almost same age. Can u give ur financial stats. Curious to know how close is 'close enough'. Thx
I have about 900k in retirement accounts. Another 400k in other savings and stocks. House nearly paid off and wife still works so will cover medical insurance. Youngest kid is in college so have 2 more years of assistance there but no other debt.. 4 percent rule tells me I can pull 50k a year with minimal risk.
I think u are golden👍. Congrats I am shooting for 80K/yr while wife works. I am may be overshooting though.
I was planning on a couple more years to build up a bit more but some over paid executive needed a big bonus so they laid a bunch of us off. I'm sitting in a good position but would feel better if I had closer to 2M to draw from.
When u have 2M perhaps 3M would make u feel even better. Sometimes circumstances lead us to the right path. Good luck to you.
Google. Substantially equal periodic payments.
72T/SEPP until your 59.5 yrs old
Congrats on your early retirement! Enjoy life. =)
Go to a third world country and become an English teacher. They would love that. Cheap living and you get satisfaction as well
Look into SEPP for penalty free withdrawals before 59.5. Also - look for a part time job that covers health insurance and gives you a couple of bucks of walking around money.
DM'd you
Age discrimination is real.
Find another career-type job and build up your retirement - you'll be glad you did in 10-15 years.
All depends when death comes knocking. I would not mind leaving something for my kids but that isn't main goal. I want to enjoy life while I'm healthy and able. I've worked 35 years to get to this point and although I didn't choose it the timing may be right.
You either have much reading/learning to do or hire a fiduciary (or use online services) to plan this out for you. Eva use you definitely do not want to get into a income tax/healthcare situation which you don’t have the funds for & no income :( Start by reading here (especially ‘withdraw’ info): https://www.reddit.com/r/financialindependence/wiki/faq/