You can "implicitly retire" at age 55 without incurring the
10% withdrawal penalty and only pay ordinary income tax on
withdrawals. You have withdraw 3.5% for each of the next
five years to avoid such a penalty. Once you start this you
have to do it for the full five years to avoid penalty.

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DORFMONT[at]aol.com (Linda Dorfmont) wrote:

- quote -

There is no requirement that a distribution after separation
has to be a total distribution. Any distribution under the
circumstances you present would be exempt from the 10% early
withdrawal penalty. It doesn't matter that he resumes
working with another employer.

That said, John needs to check with the plan administrator,
as many plans do not allow for a partial distribution after
separation. The plan may only allow for an all or nothing
approach.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

<DORFMONT[at]aol.com> wrote:

- quote -

Yes. The one caution I'd add is that he shouldn't take
distributions until he has separated from the plan sponsor.
The exception is in IRC 72(t).

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

My friend, John, is having problems on his job (contract,
not at will) and will not have his contract renewed for next
year. He has a lawsuit going. Unfortunately he will have to
take some money out of his 401K to live on until (not if) he
gets the settlement or court award for his case. He is over
55. Can he take out only some of the money and leave the
rest in or does he have to take it all out? If he finds
another job, does the exception still apply to this
distribution since he will be separated from this employer?

Linda Dorfmont E.A., CFP, CSA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >