401(k) distribution at age 58.
I have a client that has retired. She is 58 and wants to take a distribution from her 401(k) before we roll it to an IRA. She wants to pay off a loan and take a little until she turns 59.5 next year. Can anyone point me to the code or ruling that allows this transaction without penalty? Also, anything else I need to be aware of?
Permalink Submitted by Alan Spross on Thu, 2007-08-23 20:42
The exception to penalty that would apply here is listed in Sec 72(t)(2)(A)(5).
The age 55 separation from service exception applies only to distributions taken from the plan of the employer that the employee separates from in the year they attain age 55 or later.
She must have separated from that employer no earlier than the year defined above. She could be 54 at separation if she attained age 55 later in that same calendar year. The plan administrator knows her separation date and age and therefore should code the 1099R with the exception coding. If they don’t she can still claim it by filing Form 5329.