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Janicedowden writes:

I understand that if you separate age 55 or over, you can withdraw from 401K without 10% penalty (as long as your 401K holder allows it).

But I thought that you lost that penalty protection if you rolled that 401K into an IRA, and if you withdrew from that IRA before 59-1/2, you would be hit with the 10% penalty.

Anyone out there for sure on this? Just want to clarify.

Be assured your understanding is correct and the original poster is mistaken. As long as the worker separates from the employer sponsoring the plan in the year that worker reaches or will reach age 55, then the worker may take money from that plan without penalty, but subject to the distribution rules in effect for that plan as specified in the plan document. However, if that worker moves that money to an IRA (comingled or not), then the plan money immediately becomes subject to IRA withdrawal rules, so the worker can't touch that money without penalty prior to age 59 1/2 unless one of the eight exceptions we discuss at applies.

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