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Spunkee37 writes:

<<Pixey: One more question...

If I do all you tell me I have to do to take possession of my 401k at 55 without penalty, how does this work? Say I had $100,000 in my 401 & retired at 55. Do I withdraw all of this money & roll it over unto an IRA (but you said I can't withdraw this money until it's 59-1/2 once this is done) or alternatively would I pay a hugh income tax bill on this lump sum distribution in one year? Do I have to leave it in my employer's plan & withdraw as needed? What if my former employer discontinues their 401 plan or whatever when I'm retired & age 56? Is here such a thing as a 401 rollover to keep ths money under the (supposedly) more age liberal 401 rules?>>


Hey..That's more than one question!

Obviously, if you retire at age 55 and take all the money, then you will pay ordinary income taxes (but no penalty) based on that distribution in the year you take it. Some plans will allow you to take it in installments or on demand, and some won't. Some may say you have to take it all. In that case, you can take what you need for 4 to 5 years, pay taxes on that amount, and roll the rest to an IRA until you reach age 59 1/2. Anything you put in an IRA is subject to IRA rules. And the only way you can roll the money to another 401k plan is to go to work for another employer who has a 401k plan that accepts transfers from an old 401k plan.

Regards..Pixy
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