Rule of 55 — Separation from Service

Leaving your employer at age 55 or later allows penalty-free withdrawals from that plan Public safety employees qualify at age 50 instead of 55 Applies only to the plan at the employer you separated from, not IRAs or prior 401(k)s Rolling funds to an IRA forfeits Rule of 55 access, so weigh the tradeoff first

Hardship Withdrawals and 401(k) Loans

Hardship withdrawals require an immediate and heavy financial need defined by the IRS Hardship funds are subject to income tax, the 10% penalty, and cannot be repaid to the plan Loans allow up to the lesser of $50,000 or 50% of your vested balance, repaid with interest If you leave your employer, the outstanding loan balance may become a taxable distribution

72(t) Substantially Equal Periodic Payments

Section 72(t) allows penalty-free withdrawals before 59½ through a SEPP schedule Payments must continue for 5 years or until age 59½, whichever is longer Three IRS-approved methods: required minimum distribution, amortization, and annuitization Modifying or stopping payments early triggers retroactive penalties on all prior distributions

You can roll a 401(k) into a traditional IRA, a new employer's 401(k), or a Roth IRA Direct trustee-to-trustee rollovers avoid mandatory 20% withholding Indirect rollovers must be completed within 60 days to avoid taxes and penalties Converting pre-tax 401(k) funds to a Roth IRA creates a taxable event

Roth 401(k) and Tax Withholding

Qualified Roth 401(k) distributions are tax-free if the account is 5+ years old and you are 59½+ Non-qualified Roth distributions are taxed on earnings and may incur the 10% penalty Lump-sum distributions face mandatory 20% federal withholding as a prepayment toward taxes Rolling a Roth 401(k) to a Roth IRA provides more flexibility and eliminates RMDs

401(k) Withdrawal Rules

Q: Required Minimum Distributions (RMDs)

RMDs must begin by April 1 following the year you turn 73 under SECURE 2.0 Still-working employees at 73 may delay RMDs from the current employer's plan only Amounts are based on your account balance and IRS life expectancy tables Missing an RMD triggers a 25% excise tax, reduced to 10% if corrected within 2 years

Curated by: Rubric Advisors

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Normal and Early Distributions

Withdrawals after age 59½ are penalty-free but taxed as ordinary income
Before 59½, a 10% early distribution penalty applies on top of income tax
Plans typically withhold 20% for federal taxes on lump-sum distributions
Several exceptions allow penalty-free access before 59½, including disability and medical expenses

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Normal and Early Distributions

Rule of 55 — Separation from Service

Hardship Withdrawals and 401(k) Loans

72(t) Substantially Equal Periodic Payments

Required Minimum Distributions (RMDs)

Rollover Options

Roth 401(k) and Tax Withholding

Related Topics

Early Retirement Account Access (Rule of 55 & 72(t))

Required Minimum Distributions (RMDs)

Traditional IRA Deduction Rules

Normal and Early Distributions

Rule of 55 — Separation from Service

Hardship Withdrawals and 401(k) Loans

72(t) Substantially Equal Periodic Payments

Required Minimum Distributions (RMDs)

Rollover Options

Roth 401(k) and Tax Withholding

Related Topics

Early Retirement Account Access (Rule of 55 & 72(t))

Required Minimum Distributions (RMDs)

Traditional IRA Deduction Rules