How to access 401 (k) money without penalty before the age of 59 ½

Question: JS in Adams County: I’m 53 and have just heard that my company allows people to make money from their 401 (k) starting at age 55. Could this be right?

ONE: Although this sounds like it may not be true, it is! Usually, if you withdraw from a 401 (k) before the age of 59,, you will have to pay a 10% early withdrawal penalty. But there is an exception to this rule called the “Rule of 55” – and it sounds like your employer allows it. This is how it works.

If you have a “separation of service” from your current employer in the calendar year you turn 55 or older – either due to retirement, dismissal, dismissal or resignation – some employers allow you to withdraw from 401 (k) (or 403 (b) )) without having to pay the early withdrawal fine. (Note: If you are a qualified public security officer, this rule usually applies during the year you turn 50.) Just remember, however, that you still have to pay regular income taxes on withdrawals. This rule of 55 essentially simply removes the penalty.

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