401K - Rule 55

[Bee1971]

Anyone familiar with Rule 55 and your 401K

In regards to quitting , laid off , fired from your current job

You must already be 55 or older , or at least in the calendar year of you turning 55 correct ?

And this would avoid the 10% tax penalty , under the same guidelines as taking out at 59.5 ?

And your 401K must be under the same job you currently got let go from or quit

My job of 34 years might be over sooner then I want , not yet so far but some of the meetings I have had with my General Manager point in a very wrong direction - We don’t need to get into why but we all know what the last year brought to this country

Anyways exploring all my options as I currently explore a new career or possibly some technical school

Not looking to take out my 401K as a lump sum (Keep as much in there as possible) but maybe a little to supplement

What red flags / fine print or anything I might be missing in regards to Rule 55 and tax penalties with my current job situation

One more thing to add , my 401K is now in a blackout period that started last week going from John Hancock to ADP where we have our payroll thru our company

When 401K is under the blackout period , is it gaining or losing money based on the current stock market , or is it just staying flat or current until it’s under the ADP contract

Thanx Scott

 

[Dennis H]

Don’t know. Good luck. Try not to touch it if at all possible.

 

[Rydog73charger]

Don't take from your 401k! Use your emergency fund or savings outside of retirement accounts instead until you figure out what you're going to do. Bottom line THINK ABOUT THE INTEREST YOU'LL BE LOSING if you pull a giant lump sum out of your 401k.

 

[JackR]

Don't forget that 401K dollars are pre tax. So every dollar you take gets taxed next time you file.

 

[gkent]

Consider a line of credit and draw ONLY what you absolutely need. LOC interest is very low - probably a lot less that the tax you'd pay on drawing from a 401k. The nice thing about a LOC of you don't have to pay off the principle on a monthly basis, just interest. And a LOC interest rate is FAR below credit card rates so it makes sense in tough times to pay off any credit card debt with your LOC then tear up those ******* plastic cards. When its all said and done you still have the option to draw from the 401k to pay off the LOC.

 

[Bee1971]

I am not looking to take out a lump sum - I mentioned that already

But again I don’t know what my options are under RULE 55 ?
That’s why I am asking all the questions

ADP didn’t know ****

Looking to supplement maybe a less paying job while I figure out my career path for a few months that’s it

Where talking thousands of dollars please

NOT $100,000 THOUSANDS of dollars or more

RULE 55 are the questions I was asking , and honestly a lot of people don’t seem to even know it exists or how it works in relation to 59.5

Thanx


Scott

 

[Ironbuilt]

I am not looking to take out a lump sum - I mentioned that already

But again I don’t know what my options are under RULE 55 ?
That’s why I am asking all the questions

ADP didn’t know ****

Looking to supplement maybe a less paying job while I figure out my career path for a few months that’s it

Where talking thousands of dollars please

NOT $100,000 THOUSANDS of dollars or more

RULE 55 are the questions I was asking , and honestly a lot of people don’t seem to even know it exists or how it works in relation to 59.5

Thanx


Scott

Get your CDL. You can hire on with a company (C R England, Swift, etc) that will pay you while you train for the CDL and learn how to drive. Most pay around $750.00 a week while training along with a sign on bonus as high as $10,000 paid out over time. You will have to commit to staying with the company for 6-9 months on average, but starting salary after training is around $60,000. If you need more information, PM me. I set my cousin up with Swift and it was easy.

 

[Slap Stick]

I think if you roll it into another 401 k or a Roth there is no penalty.
I am not a financial or tax attorney.
If you know the reg # read it.

 

[1967coronet440]

Also look into just taking a loan out of it if you have to. I’ve done that once and there are no penalties, only pay yourself back a small amount of interest.

 

[69a100]

Don't listen to these people! Go directly to your Investment Banker and ask them these questions, that's what they get paid to do! That's why you have one too! Plus, they will give you the most honest and beneficial answer for your given situation. Good Luck

 

[Daves69]

I know I got saddled with 10% on an early distribution several years ago. Best to see a financial planner and or tax accountant.

Evidently the penalty was dropped recently due to the Covid calamity up to a certain amount. You are still subject to regular income taxes and possibly your state's tax. Laws are changing daily, more reason to confirm everything with your FP.

New stimulus bill allows penalty-free 401(k) withdrawals. Should you do it? - CBS News

 

[mopar 3 B]

Don't listen to these people! Go directly to your Investment Banker and ask them these questions, that's what they get paid to do! That's why you have one too! Plus, they will give you the most honest and beneficial answer for your given situation. Good Luck

If i had listened to my broker 4 years ago it would have cost me thousands. If he only has a company four O one he has no broker and needs to start looking for one. Think I had a six month time period to roll it with no penalty.
At time of dismissal they have to furnish the information for retirement funds. At this point his company HR director would be the place to go.

 

[Timmayy]

I know with the CARES act you are allowed to withdraw up to $100K without penalty. Just pay the state and federal taxes. I did that and paid off our house. I plan to retire within the next 5 -6 years so this was almost a no brainer for me. Without that mortgage I can contribute more back into it AND I don't have to pay the bank all that mortgage interest. I believe we had about 12-13 years left on the note.

 

[zyzzyx]

First of all, what company do you work for? I worked for G.E., and when they closed my shop
I was sixty years old. Because I was sixty, I was able to get severance pay, a Social Security
supplement from the company until I was 63, and I held off taking my pension until I was 66.
My health and dental insurance cost me the same rate every month as if I were still working
until I went on Medicare. I don't know how old you are, but if you are less than 60 at the time
of losing your job you will not get all of the bells and whistles and will have to find another job.
Your company should be holding meetings with Human Resources so everyone will know how
the job loss will effect everyone. They should be able to explain your questions about the Rule
55 and how it pertains to your specific instance. I'm glad things worked out for me because of
retiring at 60 and getting severance pay. Also being able to wait to take my pension later. It all
works out differently for everyone. Good luck with your problem, and it just may be a cloud with
a silver lining. You may find a better paying job that you enjoy more!

 

[zyzzyx]

Rebecca Lake OCT 25, 2019

Employer-sponsored, tax-deferred retirement plans like 401(k)s and 403(b)s have rules about when you can access your funds. As a general rule, if you withdraw funds before age 59 ½, you’ll trigger an IRS tax penalty of 10%. The good news is that there’s a way to take your distributions a few years early without incurring this penalty. This is known as the Rule of 55. If you’re contemplating early retirement or need to take money from your 401(k) or a similar plan for any other reason, it’s helpful to know how the rule of 55 works.



What Is the Rule of 55?
Under the terms of this rule, you can withdraw funds from your current job’s 401(k) or 403(b) plan with no 10% tax penalty if you leave that job in or after the year you turn 55. (Qualified public safety workers can start even earlier, at 50.) It doesn’t matter whether you were laid off, fired, or just quit.

The distributions are not completely tax free: Like all withdrawals from a traditional 401(k) or 403(b), you do have to pay income tax. (The employer is required to withhold 20% from any Rule of 55 withdrawal for federal income tax, which is non-negotiable.) Only the 10% tax penalty is bypassed in this scenario.

In addition, note that employers are not obliged to allow early withdrawals; and, if they do allow them, they may require that the entire amount be taken out in one lump-sum withdrawal. This could expose you to a higher income tax.

This rule applies to current – not former – 401(k) or 403(b) plans. The government does not permit penalty-free withdrawals before 59 ½ from plans you had with a previous employer. If you want access to that money under the Rule of 55, you would have to transfer those funds into your current 401(k) or 403(b) plan.

 

[Darius]

Do yourself a HUGE favor and find a Certified Public Accountant (CPA) and pay him/her whatever it cost for a "consultation" and find out FROM SOMEONE WHO REALLY KNOWS what the **** they are talking about on this matter and how it will impact YOUR situation. It will be the best $100 +or- you spend in the coming months.

 

[69L48Z27]

If your in a ‘blackout’ when your company changes providers your along for the ride. No money in or out or moved but that money is still riding the market. I would hope the black out is not more than a week.

 

[Bee1971]

If your in a ‘blackout’ when your company changes providers your along for the ride. No money in or out or moved but that money is still riding the market. I would hope the black out is not more than a week.

Thank You

 

[Bee1971]

Do yourself a HUGE favor and find a Certified Public Accountant (CPA) and pay him/her whatever it cost for a "consultation" and find out FROM SOMEONE WHO REALLY KNOWS what the **** they are talking about on this matter and how it will impact YOUR situation. It will be the best $100 +or- you spend in the coming months.

Thank You

Will look into Monday

Actually busy day at work with the snowstorm tonight in WI

 

[Bee1971]

Thanx Guys

Some great advice here

Like mentioned , starting next week I think some phone calls are in order