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you have a few choices in the 72t election but none may work for you , they may not be enough . you can't take anymore than the schedule you picked without penalty
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,690 posts, read 57,994,855 times
Reputation: 46166
Quote:
Originally Posted by MI-Roger
If your 401(k) is with your current employer, the one you plan to retire from this year, then you do not need to do anything. Request the money if you need it, and remember to check the correct box on your 2018 1040 form indicating that you qualify for the 'No Penalty" distribution. You still need to pay income tax on any withdrawal funds, just not the 10% penalty.
IF you need to withdraw money from your 401(k) plan, and IF your Plan Managers do not allow partial or periodic distributions, then the 72(T) Rule will be of assistance to you.
IF your 401(k) is with a previous employer, then you do not qualify for the "No Penalty at Age 55" provision. This is why I feel it is a good idea for employees to continue to roll their 401(k) balances forward into new employer's plans.
Follow the rules stated above:
If your 401k is with current employer, then you should be eligible for the age 55 - 401k distribution
If not... (401k with previous employer), then you will need to do a 72t (as you can with any IRA..stiff rules, .set them up in 'staged' / laddered IRA accts, )
You ALSO can take out the contributions in Roth (after 5 yr holding period) CONTRIBUTIONS ONLY, not earnings.
A 401k LOAN will be DUE... or will be considered a distribution when you terminate employment = VERY expensive (taxes due)
Need Tax mitigation on severance / termination yr? I used section 179 accelerated depreciation on future business assets.
401k does offer better asset protection against litigation (a reason to KEEP 401k, rather than IRA assets (which are less protected in litigation).
If your 401(k) is with your current employer, the one you plan to retire from this year, then you do not need to do anything. Request the money if you need it, and remember to check the correct box on your 2018 1040 form indicating that you qualify for the 'No Penalty" distribution. You still need to pay income tax on any withdrawal funds, just not the 10% penalty.
IF you need to withdraw money from your 401(k) plan, and IF your Plan Managers do not allow partial or periodic distributions, then the 72(T) Rule will be of assistance to you.
This is what applies to me. I'm currently 52. So if I retire at 57, as I hope to do, at that time I would be retiring from my current employer and use the 72T Rule.
Then go to work somewhere else, even if only part time.
My question to you to ask your plan. Will it allow you to pay it back even if you are no longer employed? That is the question.
EXACTLY! (and StealthRabbit had it right)
With my DH's 401k, you can not take loans from it unless you are still employed and if you take the loans out and then retire or quit before paying back the loan, then it becomes a taxable event and possibly a penalty will also be incurred.
This is what applies to me. I'm currently 52. So if I retire at 57, as I hope to do, at that time I would be retiring from my current employer and use the 72T Rule.
Then go to work somewhere else, even if only part time.
Here is an option for you. Between now and the time you plan to retire put some money into a brokerage account that will be there for you at 57. How much will depend on how much income you need at 57 to help you make it to 59.5 Hope this helps.
Here is an option for you. Between now and the time you plan to retire put some money into a brokerage account that will be there for you at 57. How much will depend on how much income you need at 57 to help you make it to 59.5 Hope this helps.
+1 ^^^ this. I left my job at 56 and cashed out my 401k. I put much of it into an IRA (rollover) and needed to use some to get by, move and find a new job. After getting settled and finding a new job I put much of that into a investment account and bought some AWF and KBWD. Making decent money. I paid income tax only; on the portion that I did not rollover.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,690 posts, read 57,994,855 times
Reputation: 46166
Quote:
Originally Posted by Blazin65
This is what applies to me. I'm currently 52. So if I retire at 57, as I hope to do, at that time I would be retiring from my current employer and use the 72T Rule.
...
I agree with above (Add to your savings and forget the 72t (at age 57)
Clarification on "This"
1) You are NOT at your "previous 401k" place of employment? (Thus considering a 72t)
2) Current employer does NOT have 401k (if it does, you can possibly still roll previous 401k)
get the scoop, 72t is burdensome (must strictly comply and FULFILL Distribution plan.
These payments must occur over the span of five years or until the owner reaches 59½, whichever time period is longer
Then go to work somewhere else, even if only part time.
Something that worked well for me was to take a PT gig that PAID me to travel (internationally). Helping to fund the 'Bucket List". Spouse accompanies at will. Lots of flexibility of schedule and employment burden once you can say NO!
There are many jobs with perks, when you finally have time to pursue those jobs and benefits!
I have a lot of things I would like to learn, and being paid while learning is an added benefit.
This is all incorrect. Well, actually, StealthRabbit's comments and interpretation are incorrect; the Investopedia and other information is correct for "early withdrawals" from IRAs and 401(k)s, but the OP's situation would not be an early withdrawal. In other words, Stealth linked to the wrong information.
As always, if you want to know the correct information, go to the law itself. As defined by 26 U.S.C § 72(t)(2)(A)(v), imposition of the 10% penalty does not apply to any distribution made to an employee after separation of service after attainment of age 55. (emphasis added).
Withdrawing funds from a 401(k) after retiring at age 57 as the OP plans to do, is no different than if he was 59 1/2 or older. The exact same rules apply; in fact, the rule for allowing penalty-free withdrawals from retirement accounts at age 59 1/2 is in the same subsection and can be found at 26 U.S.C § 72(t)(2)(A)(i). He can take as much or as little as he wants in either a one-time lump sum or in periodic payments (as long as his plan provides such options).
There is absolutely no requirement to take payments over a period of a minimum of five years as StealthRabbit erroneously stated.
the whole thing hinges on whether the op's plan allows periodic distributions . if it does he can draw whatever he likes with no penalty .
if it does not you are usually allowed only 1 withdrawal . if you want to pay the taxes you put it in the taxable account .
if it gets rolled over to an ira you are back to the penalty until 59-1/2 unless you do 72t elections which can be hassle if the amount does not provide what you need .
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