Three conditions must be met for the IRS ‘rule of 55’ to work:Dang. If that's true, it really throws a monkey wrench into my plan. I was planning on retiring at age 56. I'm 53 1/2 now. I have a strong suspicion Megacorp will be eliminating my job before I turn 55 (so close). I have a fair amount in non tax-deferred also, but if I had to be done a bit earlier, it may put a strain on it before 59 1/2.No. You need to be at least age 55 in the year of separation from your employer to utilize the ‘Rule of 55’.
•The participant must be age 55 in the year of separation from the employer.
•The funds must remain in the severed employer’s 401k plan and not moved.
•The employer’s plan (and 3rd party administrators if applicable) must allow partial withdrawals within the plan for participants below 59.5 years of age.
The 72t SEPP rules are very restrictive. The amount is based upon one of three IRS life expectancy tables (like an RMD) and do not allow how much one decides to take out. is not a mere five-year span requirement to take payments, but the latter of two conditions. From the IRS FAQ page:
The taxpayer does not modify the SoSEPP (other than by reason of death, disability, or distribution to a qualified public safety officer under Section 72(t)(10)) before the date that is the later of:
• The 5th anniversary of the date of the first SoSEPP payment; and
• The date the taxpayer reaches age 59 ½.
Here is another way if you are under 55 and do not want to take the SEPP route. If your ‘new’ employer for a short-term has a 401k that allows you to roll the prior employer plan assets in and allows rule of 55 withdrawals, then merely go to work there until the year you turn 55 and retire. Then that employer becomes your severed employer, and you are good to go.
Statistics: Posted by Hacksawdave — Sun Aug 25, 2024 2:51 pm — Replies 9 — Views 406