55+ 401k Withdrawals & Rollover Funds
Hypothetical scenario:
John Doe leaves an employer at age 52 with a $100,000 401k. He rolls the funds into his new employer plan and subsequently retires from that employer at age 56. The new employer plan allows for withdrawals after age 55 without incurring the 10% early penalty.
Are all funds free of the 10% penalty even though $100,000 from a previous employer plan that he left prior to age 55 and, if so, does anyone have the IRS code that states as much?
Permalink Submitted by Alan - IRA critic on Fri, 2016-04-15 19:38
There is no exception in the tax code to the age 55 separation exception quoted below. That means that all amounts distributed from a plan after separation at 55 receive the penatly exception. Sec 72(t)(9) does state an exception to qualified plan rollovers into a 457 plan. Those rollovers are not treated as 457 distributions (all penalty free), and are treated as qualified plan distributions with respect to Sec 72t.