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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 75340  
Subject: Re: Early Retirement Date: 7/30/1998 8:00 AM
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Greetings, SanDiegoJay, and welcome.

I was always under the impression you had to wait until age 59 1/2 in order to take penalty free withdrawals from a 401(k).

In my case, I left a 401(k) balance with a former employer. I started a new 401(k) with my new employer. I am currently 48. If I retire at age 55, would I be able to take penalty free withdrawals from the 401(k) from my former employer? The materials I received when I left the company said I wouldn't be able to take withdrawals before age 59 1/2 unless there was a hardship. Are they wrong?


Not necessarily. The law allows you to receive qualified retirement plan proceeds as early as age 55 free of any early withdrawal penalty. The plan itself, however, may say you may not begin retirement withdrawals until a later age. A significant number of plans still have that proviso. In that case, you can still get a lump sum free of penalty after age 55, but the taxes on large sums would be significant. The other alternative is to either leave it in the 401k or put it in an IRA and use 72t distributions. Your best bet is to read your old plan's summary plan description to see what that plan's provisions are and what distribution options you have.

Regards…..Pixy
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