Can you withdrawal funds from a 401k beginning at age 55 if you are retired at 55 without incurring penalties?

Answer 1

First, the general advice is do not do this. Unless you have a detailed plan which enables you to have enough funds in retirement even after tapping your 401k early, do NOT remove funds early.

Now, with that advice out of the way, the answer is yes, you can withdraw funds from a 401k at age 55 if you are retired without any penalty. You WILL pay income tax on the amount as ordinary income.

This is a provision under exceptions to the penalties for early withdrawal.

If you follow the usual advice from financial "professionals" you will be told to roll the 401k money into an IRA, then the "professional" financial advisor can manage your money, make it grow for you and earn fees and commissions for the financial "professional." Your financial professional may be unaware of this exception or may just believe it isn't wise to tell you about it. Ask him/her to look it up. They will come back to you and verify the exception exists.

You must 1. separate from your employer in the year you turn 55 (or later)

2. keep the money in the 401k plan (not all plans co-operate allow this) 3. applies only to the plan from employer you left at 55: not previous

employers or plans