Age 55 Separation from Service
A client will separate from service at age 56 and would like to take a partial distribution of $100,000 from his 401k at that time. The question is, if in a bad case scenario where he needs to access additional funds in the future, can he make another distribution before 59.5 under the Age 55 penalty exception or would he have to use another exception?
Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2018-09-20 17:01
The age 55 exception is automatic and the 1099R should be coded with the exception code. However, some plans do not provide flexible distribution options, and in the most restrictive case might only allow one lump sum distribution which could put you into a higher tax bracket. But if the plan allows even one distribution per year, any such distribution would get the exception for each year’s distribution.