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Have you quit/retired? If so, at 55 you most likely will not have a penalty.

There is an exception to that rule, however, which allows an employee who retire, quit or are fired at age 55 to withdraw without penalty from their 401k (the "rule of 55").

There are three key points early retirees need to know. First, this exception applies if you leave your job at any time during the calendar year in which you turn 55, or later, according to IRS Publication 575.

Second, if you still have money in the plan of a former employer and assuming you weren't at least age 55 when you left that employer, you'll have to wait until age 59 1/2 to start taking withdrawals without penalty. Better yet, get any old 401k's rolled into your current 401k before you retire from your current job so that you will have access to these funds penalty free.

Third, this exception only applies to funds withdrawn from a 401k. IRAs operate until different rules, so if you retire and roll money into an IRA from your 401k before age 59 1/2, you will lose this exception on those dollars.


http://www.401khelpcenter.com/401k_education/Early_Dist_Opti...

Taxes and potential penalties should only be on the amount you take out.

IP,
not a tax pro
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