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<Your smaller 401k is with your current employer. It is a retirement plan. Retirement plans have a different "magic" age than IRAs. You can take penalty-free money from them after you leave your job when you are 55 or older. Therefore, as long as you don't move that money to an IRA, you can take installment payments from the 401k and only pay ordinary income tax.>

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?
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