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  • Withdraw from Your 401(k) at Age 55

    Are you considering an early exit from the labor force and asking at what age can I withdraw from my 401(k) Plan? 

    The general rule for most retirement accounts is distributions are penalty free after reaching age 59 ½.  This is true for IRA’s and most employer sponsored plans (401k, 403b, pension plans, etc.).  However, there is a way to access funds in your current 401(k) plan penalty free as early as age 55!

    The Rule of 55

    The Rule of 55 allows those that leave their job (quit, retire, downsized, etc.) during the calendar year in which they turn 55 (or older) to begin penalty free withdrawals from their current 401(k) Plan.  You can’t stop working prior to age 55 and then institute the provision in a future period, so timing when you cease working is paramount to the effectiveness of this strategy.

    It is important to stress that this provision only applies to withdrawals from your current 401(k) plan.  To make the most of this strategy, considering rolling other available sources (prior employer 401(k) monies, IRA’s, etc.) into your current 401(k) Plan (assuming your Plan allows – most will).

    To those who have been successful and diligent enough to be researching this topic, we commend you!  For an authoritative source on what we discussed here, see IRS publication 575 and search for the term “55” (Search .pdf by using the Ctrl+F keys).

    Scott M Dufek, CPA | 01/18/2019

    Tax Due Dates