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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: Re: Early Retirement Date: 7/28/1998 11:19 PM
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Greetings, Heb, and welcome.

I am seriously considering 'early' retirement (current age=56) and am more than a little confused with all of the apparent options regarding 401(k) withdrawals. My 'funds' currently reside in 3 basic areas, Cash/Savings (25%); Rollover IRA (50%)(from previous employer) and a smaller 401(k)(25%) with my current employer. It is my desire to draw down somewhat equally from the cash & smaller 401(k) for the next 7 years and then reduce the withdrawals by the amount I expect to receive from Social Security. Of course I do not want to incurr any penalties for the withdrawals prior to reaching age 59 1/2 so that is the question. As I am retiring, inistead of changing jobs, can I do that? Where might I look for definitive rates of withdrawal? I can 'wait' until I am 59 1/2 to touch either 401(k) for that matter. Just not real sure the best course to follow.

Contrary to what others have said to you regarding 72t drawdown rules, I have some good news for you. You probably don't need to do that in your situation! I assume your cash/savings is currently in taxable accounts and not IRAs. Hence the pre-59 ½ rules don't apply. Your smaller 401k is with your current employer. It is a retirement plan. Retirement plans have a different "magic" age than IRAs. You can take penalty-free money from them after you leave your job when you are 55 or older. Therefore, as long as you don't move that money to an IRA, you can take installment payments from the 401k and only pay ordinary income tax. Almost all 401k plans will allow you to take payment in installments from two to 15 annual payments. Thus, figure out what you need from both sources of money, and set up your 401k installments accordingly.

If for whatever reason your plan will NOT let you take installments, then you'll be forced to move the cash to an IRA, and that in turn forces you into following 72t rules.

Regards…..Pixy

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