Taking funds from 401k or IRA at 58 but unemployed

I find myself 58 and unemployed. A friend told me i could take money from my 401k or IRAs without the 10% penalty. Is that possible? Thanks very much.



  • The next link lists all the penalty exceptions possible, and they differ for 401k and IRA plans. The most obvious exception is separation from service at age 55 or later. All distributions directly from the 401k sponsored by the employer you separated from will be penalty free. You only need about 12 months of expenses, so you could take a 401k distribution of the amount needed to support you to age 59.5, then roll the rest over to an IRA. Or if the plan offers flexible partial distributions, just request them as needed and wait until 59.5 to do the rollover. I would avoid substantially equal periodic payments (72t plan) when you are only 1 year short of 59.5.
  • https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

So it sounds like what youre saying is that i can take distributions out of a 401K any way i want with no 10% penalty but not out of an IRA. Do i have that right? Thanks again.

Somewhat right. The 401k plan can and might limit your distributions to a lump sum. But since you are so close to 59.5, you could live with that by withdrawing only what you need for the next year, while rolling over the rest. The plan still gets their lump sum distribution, but part of it goes to you. IRAs do not offer this exception, but they have others that you can review from the link. However, the IRA exceptions are less likely to match up to your situation, so you will probably need to take your distribution directly from the 401k plan.

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