"Age 55 Rule"- Separation from Service 401(k) | Ed Slott and Company, LLC

"Age 55 Rule"- Separation from Service 401(k)

If I separate from service at age 58 can I leave a portion of my 401(k) in the plan and roll the rest to a self directed Individual Retirement Account? I'd like to withdraw living expenses from the 401(k) balance that I leave in the plan and not be subject to 10% penalty on those distributions.

I understand the summary plan document must first allow for a partial rollover first but want to make sure the IRS doesn't have an all or nothing rule here.

Thanks in advance.

Any distributions that you do take will be penalty free. However, the distribution options of the plan can vary between plans. The most restrictive plans limit your option to one distribution, which you could split between direct rollover and payment to you. If you did have to make a lump sum distribution, the period between age 58 and 59.5 is short enough that you could probably request a check to yourself for enough to tide you over to 59.5 after which your IRA distributions would be penalty free.

Thank you Alan.

 

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