If you have your 401(k) plan and you have now attained the age of 55, and it may happen due to any financial emergency or because of any other specific condition you may need to withdraw money from your 401(k) account.
But are you allowed to do so? Maybe you are allowed and in some cases may be not let’s discuss what if you want to withdraw money at the age of 55.
The most important factor to consider here is that you should be still working with the company who has set your 401(k) plan.
In case if you are not working with that company then it will be dependent on various factors and one of that is the age factor and when you have left the employment with the company which set your 401(k) plan. In this article, you will get to see all the circumstances related to withdrawal of your money at the age of 55.
The Scenario When You Are Still Working With The Company
In most of the 401(k) plans it is found that they don’t allow you to make the ‘regular withdrawal’ when you are working with them and attained the age of 55.
Regular withdrawal are those withdrawals which are not subject to any penalties, and you don’t have to qualify certain set circumstances to make that withdrawal, and one of those circumstances is your credit score.
But in case if you need to have hard cash in your hands, then you can always opt for the borrowing money in the form of a loan from your account or make the withdrawal in the form of ‘hardship withdrawals’ and only if your 401(k) is having these options.
You must understand that all of 401(k) plans are required to offer loans or hardship withdrawals.
You can also opt to contact your plan administrator – his details and contact information you will find in your annual plan statement, to look for whether your plan has a provision which is called an ‘in-service’ distribution, and if it is where you can make use of it.
The Scenario When You Are No Longer Working With The Company
It may also happen that you want to take money out of your old 401(k) plan, which means you have opted to take money out from the account which your past employer has set and currently you are not working with him or with the company. In this case, there may be a little different set of rules.
In this case, if you have left your previous employer or company at the age of 55 or maybe after you have attained the age of 55, then you can easily make withdrawals from your old 401(k) plan.
Whatever amount you opted to withdraw from your plan will be considered as a taxable income, but the good news is that it will not subject to an early withdrawal penalty taxes.
It will also apply if you have not attained the age of 59 1/2 years and you have left money n your old 401(k) plan. For the qualified public safety employees, this provision is applied to them at the age of 50, rather than the general age of 55.
It is always advisable if you can learn the rules related to ‘IRS Retirement Topics On early Distribution’ and educate yourself with other related information so that you can apply yourself to the particular age group.
It may also happen that you have rollover your 401(k) plan into your IRA account, then the early rollover would not apply. In case you start taking a regular withdrawal from your IRA before you have reached the 59 1/2 of age, in that case, you will need to pay the incomes taxes which will be on the amount which you will withdraw.
The Scenario When You Left Your Previous Employer Before You Attain The Age Of 55
It may also happen that you have left your employer who has set your 401(k) plan before you attain the age of 55 and before the age of 50 for the ‘public safety employees’ which is defined by IRS.
In this case, you will not get to enjoy the age benefits as you are over the age of 55 and in this situation you are not liable for the particular age withdrawal provisions.
Still, if you make any withdrawal, it will always be subjected to early withdrawal penalty taxes, but when you rollover your 401(k) plan into IRA and qualify for any penalty, in that case, you don’t need to pay any kind of taxes.
How To Plan Your 401(k) Account With Opportunities Available
You must be aware of the fact that the money in your 401(k) plan is always creditors protected, and when you opted to cash in that money early, you are only avoiding that protection which was available to you. If you are in the state of financial emergency, you can always opt for the other options, and it is not advisable to cash in the money from your 401(k) plan.
In case you are retiring before the age of 60 then you should keep some money in your 401(k) account, till you attain the age of 59 1/2. And by doing so, you can always have the cash in the form of withdrawals, and they will be not subjected to early withdrawals penalty taxes.
The Scenario When You Inherited 401(k) Account
Many cases are there in which the person gets to inherit or be the beneficiary of the 401(k) plan, in that scenario the rules and options mentioned above really do not apply.
Then you will be liable to many other rules, and you have to mention the relation over there like whether you are a spouse or non-spouse. You will also have to mention your age at the time of the death of 401(k) owner.
Considering all the above facts and details, you will easily manage and handle your 401(k) plan and can understand the need whether you should opt for the withdrawal or not.