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401k…55 rule
Posted on 3/12/26 at 7:21 am
Posted on 3/12/26 at 7:21 am
I understand you have to be working at 55 to ‘retire’ and have the rule apply, but…
Can you only withdraw penalty free the money invested with the company you’re currently with?
If you rolled over everything with the current company is it accessible penalty free even tho you may have only been with them 2-3 years?
If you quit/retired at 50 then went and got a job at 54 and rolled your previous 401k over to that company, does the 55 rule apply?
Can you only withdraw penalty free the money invested with the company you’re currently with?
If you rolled over everything with the current company is it accessible penalty free even tho you may have only been with them 2-3 years?
If you quit/retired at 50 then went and got a job at 54 and rolled your previous 401k over to that company, does the 55 rule apply?
3
Posted on 3/12/26 at 7:49 am to BabyTac
It’s only invested money with the employer you retire from at 55. Not any previous employer rollover. Gains on the investments are not eligible for penalty free withdrawal unless you have been there 5 years or longer
Posted on 3/12/26 at 9:19 am to tigamike
I've always understood you could access funds that you have rolled over into the employer 401k penalty free using Rule of 55. Never heard of a five year rule on the gains.
Do you have a reference for that because it sounds entirely made up.
Do you have a reference for that because it sounds entirely made up.
This post was edited on 3/12/26 at 9:29 am
Posted on 3/12/26 at 9:26 am to tigamike
quote:Perhaps this is the 5 year gains issue you were referring to, not specific to rule of 55 and just applies to Roth 401k not traditional. "The Roth 401(k) 5-year rule requires that 5 full years have passed since January 1 of the year of your first contribution before earnings can be withdrawn tax-free." Earnings on Roth 401k would also be taxed if withdrawn before 59.5 so not optimal to use Rule of 55 for Roth 401k withdrawals.
Gains on the investments are not eligible for penalty free withdrawal unless you have been there 5 years or longer
This post was edited on 3/12/26 at 9:49 am
Posted on 3/12/26 at 12:09 pm to tigamike
quote:
Gains on the investments are not eligible for penalty free withdrawal unless you have been there 5 years or longer
Not true. I know. I only worked 2 years for the job I left when I was 55. I took the money the next year and paid no penalties, just regular taxes where applicable.
My understanding is that you can roll over assets into your 401K and access them penalty free under the Rule of 55.
Posted on 3/12/26 at 7:55 pm to BabyTac
RO55 is for traditional 401k , not a roth. It's only for the job you just left. They take 20% for regular taxes. No rolling it over.
If you have a roth 401k you can use the rule of 72t, but you will have to take the same exact amounts out each month till 59.5.
(SEPP's).
As far as only working 2 or 3 years, I believe you could but you have to have a minimum amount in it, otherwise you're company will just cash you out.
Quitting at 50, getting a new job at 54 , no you can't roll anything over.
If you have a roth 401k you can use the rule of 72t, but you will have to take the same exact amounts out each month till 59.5.
(SEPP's).
As far as only working 2 or 3 years, I believe you could but you have to have a minimum amount in it, otherwise you're company will just cash you out.
Quitting at 50, getting a new job at 54 , no you can't roll anything over.
Posted on 3/13/26 at 9:00 am to Pockets
quote:If employer plan accepts rollovers why not? I've never heard of this being prohibited for Rule of 55 but perhaps I'm wrong
Quitting at 50, getting a new job at 54 , no you can't roll anything over.
This may be obvious to most but to be clear, the 20% is just tax withholding (not the tax rate). You'll get any excess back on your tax return.
Can anyone confirm if you have a mix of Roth 401k and traditional 401k if distributions must be taken pro rata? If so, rollover of any Roth 401k balance to a Roth IRA would be critical.
This post was edited on 3/13/26 at 9:00 am
Posted on 3/13/26 at 5:42 pm to BabyTac
Just another related comment. When you retire, you are not locked in to investing in the stock market with your 401(k) funds. You can convert it to a self-directed IRA and invest in many other avenues such as real estate. When I retired, I did just that and invested into rental properties. I used Mountain west IRA. FYI.
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