How Can CIA Help You?

Request Consultation
Ask an Advisor
Financial Tools
Request Consultation
Ask an Advisor
Financial Tools
Blog

Retirement Planning Question: IRS 55 Rule

Q:¬†Does the IRS “55 Rule” mean that if I retire in the year I am 55 years old that I qualify for the Rule. For example, If I turn 55 in November and it is now August- that I could retire and my 401(k) would fall under this Rule until I am 59 1/2. This way (if needed) I could access some of my 401(k) without the 10 percent penalty. I plan on retiring just a few months before I turn 55.

A: Great question, please refer to the following link: http://www.irs.gov/taxtopics/tc558.html

Additional exceptions to the 10% additional tax, Item 1 states:

Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50.

As long as separation occurred in or after the year you reached age 55, the IRS allows you to take distributions from your 401(k) without paying the additional 10% tax.

Please keep a few things in mind:

  • Confirm with your 401(k) plan administrator that you can keep your funds within the plan.
  • Distributions from the 401(k) will still be subject to ordinary income tax (federal & state).
  • If you do rollover your 401(k) into an IRA, the 10% additional tax will be in effect until you reach age 59 1/2.


 

Get Started Today

Request Consultation
Ask an Advisor
Retirement Calculator
Retirement Calculator
Social Security Optimizer
eBook
jordan 12 cherry jordan 12 cherry jordan 12 cherry jordan 12 flu game jordan 12 flu game jordan 12 flu game jordan 12 french jordan 12 french jordan 12 french jordan 12 gym jordan 12 gym jordan 12 gym jordan 12 ovo jordan 12 ovo jordan 12 ovo jordan 12 unc jordan 12 unc jordan 12 unc jordan 12 wings jordan 12 wings jordan 12 wings
adidas human race black adidas human race blue adidas human race green adidas human race grey adidas human race pink adidas human race red adidas human race white adidas human race yellow