Two 401(k) accounts | Ed Slott and Company, LLC

Two 401(k) accounts

I have two 401(k) account balances. The first 401(k) is with a previous employer. The second 401(k) is with my current employer.

I plan to retire this year and I will be 57 this year on my birthday.

I know that I will be able to withdraw money from the 401(k) plan of my current employer and not be subject to the 10% penalty tax for this withdrawal.

After I retire later this year, can I withdraw money from my first 401(k) account [the account with my previous employer] and not have to pay the 10% penalty tax for a premature withdrawal?

Only if you also separated from the first employer in the year you reached 55 or later.  The 10% penalty exception for separation at 55 only applies to the plan of the employer you separated from at 55 or later. It sounds like you left the former job prior to the year you reached 55, and you would need to wait until 59.5 to eliminate the penalty on distributions from the former employer's plan.

could he roll the other 401k in to the plan of the employer he seperated from after age 55 and avoid penalties on all of it? Or, do the segregate rollovers from the calculation of penalty free withdrawals after age 55? - m

No segregation is required. Any IRAs the plan will accept could also be rolled into the current plan if the plan will accept IRA and/or other QRP rollovers. (Separate accounting would be required however if the current plan was a 457b, as rolling into a 457b will not result in elimination of the penalty on rollover of other plan types). 

I left my previou employer 5 years ago when I was 52. My first 401(k) remains at this previous employer.The 401k at my current employer accepts 401k and IRA rollovers.So, I could transfer the 401k balance from my previous employer to the 401k plan of my current employer and avoid the 10% on withdrawals from the current 401k plan upon separation of service later this year? Thank you for your help.

Yes, you could do that if you expect to need the balance from both plans prior to 59.5.


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