rule of 55 | Ed Slott and Company, LLC

rule of 55

THE RULE-OF-55 AND RMD CONVERSIONS: TODAY’S SLOTT REPORT MAILBAG

Question: Hi, I am age 50 and am targeting retirement at age 55. My current employer is selling the division I work for, and I see the potential that I could be laid off at, say, 52. If this were to happen, could I join a new employer with a 401(k) plan, roll my old 401(k) over to the new plan, and then take a distribution (both the rolled-over funds and the new 401(k) funds) under the rule of 55? The statute suggests that I could do this, but I have seen comments that the rollover funds wouldn't count.

Build Back Better and The Rule of 55: Today's Slott Report Mailbag

Question: Ed, Since the Build Back Better bill is still in legislative limbo, does that mean that backdoor Roth IRA contributions are still available for 2022? If so, what do you suggest if someone makes a backdoor Roth contribution early in 2022 and then the legislature retroactively disallows it when the bill is finally passed?

The Rule of 55 – An Exception to the Early Withdrawal Rules

If you have a 401(k) account or other employer sponsored retirement plan, you probably already know that a distribution before you reach age 59½ is going to be subject to a 10% penalty. One exception to the 10% early withdrawal penalty allows participants in a qualified plan to take a distribution from the plan after leaving the job as long as they are age 55 or older. This rule, sometimes called “The Rule of 55,” is an exception to the early withdrawal rules that generally levy a 10% penalty on amounts withdrawn before age 59 ½. This exception does not apply to IRA distributions.

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