Comments on: 7 Milestone Birthdays That Affect Your Retirement

By: Bill Rowe

Bill Rowe — Fri, 12 Mar 2010 00:32:19 +0000

Thank you. I know someone who left her work after 55 and she was able to get her 401k money. I had wondered how she did it. I thought that she had to be 59 1/2. It was murky and this clears it up.

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5 Ways to Win the Race to Retirement « Redeeming Riches — Tue, 29 Sep 2009 18:10:51 +0000

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Thu, 03 Sep 2009 08:38:37 +0000

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By: jtopp

jtopp — Thu, 03 Sep 2009 02:37:09 +0000

Yeah, you HAVE to be at least turning 55 in the year you retire to make this work.

But the benefits are huge because you have total flexibility and can tap the money whenever you need it rather than be locked in to a 72t distribution schedule.

Thanks for the comment and forcing me to back up my post! Nice job. I need that once in a while =)

By: Evolution Of Wealth

Evolution Of Wealth — Thu, 03 Sep 2009 01:36:35 +0000

I stand corrected.
So then the benefits of the 401k are that you would have more flexibility of withdrawals if and only if you seperated service after age 55.
Otherwise, the only penalty free access before age 591/2 is through IRA rule 72t distributions using one of IRS calculation methods. That once started need to be continued to age 59 1/2.
Fair enough?

By: jtopp

jtopp — Thu, 03 Sep 2009 01:15:31 +0000

Hey Evolution of Wealth, I appreciate your comment. I’ll have to respectfully disagree with you however.

The lump sum distribution could be a requirement found in the Summary Plan Discription from your employer – they might put their own restrictions on it, but the IRS does not.

This is from Publication 17 on the IRS website:

Additional exceptions for qualified retirement plans. The tax does not apply to distributions that are:

From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), ”

It puts no stipulation whatsoever on how the money is withdrawn. You can take as much, as little or even periodic withdrawals from an IRS standpoint.

Also, Ed Slott – known as the IRA Guru – says this at his website http://irahelp.com

“they can be stopped anytime as far as the IRS is concerned. There are no tax code rules. However, the plan might have some stipulation that the monthly withdrawals must be taken for a certain time after you start them. That would be a plan requirement and have nothing to do with any IRS requirement.”

Basically, you’ll want to check with your employer to make sure they allow this, but most of the time they do. The IRS doesn’t care how you take it.

By: EvolutionOfWealth

EvolutionOfWealth — Wed, 02 Sep 2009 23:02:54 +0000

I just want to clarify. At milestone #2 the “Age 55 Exception” falls under rule 72t. It allows a lump sum distribution from your 401k without the 10% early withdrawal penalty when a seperation of service occurs at age 55 or later. That’s it, only lump sum and only with a seperation of service.
However, also under rule 72t is the periodic and equal distributions can be taken from an IRA account at age 55 or later without the 10% early withdrawal penalty. The IRS has a formula for the calculation of this distribution method. This cannot be done from a 401k.