55 rule
In regard to the 55 rule on withdrawals penalty free. If a person retires at 56 and then goes back to work and starts another 401k plan and leaves at 59, would the last plan be the only plan that he could withdraw from penalty free?
In regard to the 55 rule on withdrawals penalty free. If a person retires at 56 and then goes back to work and starts another 401k plan and leaves at 59, would the last plan be the only plan that he could withdraw from penalty free?
Permalink Submitted by Alan - IRA critic on Tue, 2014-09-23 18:56
If the person returned to work with a different employer, the first plan is the only one that could provide penalty free distributions from 55 to 59.5. The second plan would not become penalty free until 59.5. If the person returned to work with the original employer, there is no clear guidance on whether the original plan would still have the age 55 exception, or if the ended separation from service would end the penalty waiver. Since any distribution from that plan would no longer be due to separation from service, most likely the penalty waiver at 55 would be forfeited by the return to the same employer.
Permalink Submitted by Edward Gorski on Tue, 2014-09-23 19:15
what if there were two employer plans? Meaning the first one with employer A that was left at age 56 and then employer B plan that was left at age 59. Would 55 rule apply to both or just one?
Permalink Submitted by Alan - IRA critic on Tue, 2014-09-23 19:37
Just to Employer A’s plan. Having a later plan with B does not affect A.