55 Exception yet still working for the company
My client has confirmed with her current employer’s human resource department that she may withdrawal from her current 401(k) plan while still employed. My client is 64. She would like to do this because her options are limited in her current 401(k) and she would like more diversification as she approaches retirement.
I have only heard (and the forum talks about) Age 55 Exception after an employee has separated from service and avoiding the 10% penalty.
Has anybody else had their client withdraw from their current employers 401(k) plan and roll the money over to an IRA?
Permalink Submitted by Alan - IRA critic on Wed, 2013-06-19 18:45
In service non hardship distributions are commonplace, and can include various portions of a qualified plan balance, although employee deferrals cannot be distributed prior to age 59.5. While immaterial in the case of a rollover, the 10% early withdrawal penalty applies prior to age 59.5 for in service distributions when no other exceptions apply. The age 55 penalty exception only applies prior to 59.5 and to those who have separated from service at 55 or later. Since your client is 64, there is no early withdrawal penalty regardless of whether the distribution occurs while still working or after separation. This statement has been broadly based because I did not know exactly what your question was beyond the frequency of in service distributions.
Permalink Submitted by Peggy Fisher on Thu, 2013-06-20 14:42
Good point. Bad quesiton. But I think you saw through me….My question should have been… is my 64 year old currently employeed client allowed to ROLLOVER all/or a portion of her 401(k) and if she is/does would she be accessed a 10% early withdrawal penalty? If I understand your response the answer is…In her particular case…..Yes, she may withdrawal the funds. No she will not be accessed a penalty.Did I understand correctly?
Permalink Submitted by Alan - IRA critic on Thu, 2013-06-20 16:56
Yes, you have it. Never an early withdrawal penalty after 59.5.