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I believe IRS Pub 590 should answer most of your questions.

My understanding is that a recent law change has made it possible to withdraw all or part of your qualified retirement plan funds without penalty (but subject to income tax) if you leave that employer in or after the year in which you reach age 55.

Another option is to roll over the proceeds into an IRA as you mention. If you do the rollover properly, you won't have any immediate tax consequences, but there are limitations on penalty-free withdrawals.

You can get Pub 590 at under forms and publications. You may want to check out some of the other retirement related boards here also. And for additional information try

Good luck.

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