If you retire or are laid off in the calendar year you turn 55 or later—or the year you turn 50 if you’re a public service employee—you can withdraw funds from your current 403(b) or 401(k) plan without paying the early withdrawal 403(b) or 401(k) penalty.
Then, does the rule of 55 apply to all 401ks?
One common misunderstanding with the rule of 55 is that it applies to all retirement accounts. But, in fact, individual retirement accounts are not eligible for this exception. It works only with your current 401(k). So any money sitting in an account from an old job isn’t covered by the rule of 55.
One may also ask, at what age can I withdraw from my 401k?
The IRS allows penalty-free withdrawals from retirement accounts after age 59 ½ and requires withdrawals after age 72 (these are called Required Minimum Distributions, or RMDs). There are some exceptions to these rules for 401ks and other qualified plans.
What is the IRS rule of 55?
The IRS Rule of 55 allows an employee who is laid off, fired, or who quits a job between the ages of 55 and 59 1/2 to take money from their 401(k) or 403(b) plan without the 10% penalty for early withdrawal.
Does Rule of 55 apply to pensions?
The Rule of 55 doesn’t apply to any retirement plans from previous employers. … Additionally, the Rule of 55 doesn’t work for individual retirement accounts (IRAs), including traditional, Roth and rollover accounts. You’ll have to wait until age 59½ to access those assets without penalty.
Can I retire at 55 and collect Social Security?
You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
Should I take the early retirement package at 55?
Less time to save for retirement
If you accept an offer to retire early, say at around age 55, you could be giving up 10 years or more of saving for retirement. Less time to save means you will have fewer savings available during retirement.