401k and age 55

L1: 401k and age 55I retired from my company at age 50 in 2000. Withdrewmy 401k and took lump sum pension which I used to set up 3 IRAS. In 2002 I went back to the same employer and will have about $110,000 in my 401k again by 9/06.I plan on retiring again in Sept at age 56. My question is the 110k that I now have in my 401k can be withdrawn without a 10% penalty correct? Does it have to be withdrawn at one time or could I withdraw 25k per year over 4 years to carry me till age 60 and reduce my tax consequences?Love your site read it almost every day.2006-02-23 19:45, By: ED, IP: [68.84.236.157]
L2: 401k and age 55Hello Ed:
From an IRC perspective, as long as the $110,000 remains in the employer plan AND you separate from their service (for the 2nd time), then yes, you can withdraw as much as you like whenever you like without the imposition of the 10% surtax.
However, often times, employer plans have rules with which you must also comply which may totally or partially restrict the amount and timing of those withdrawals.
TheBadger
wjstecker@wispertel.net
2006-02-23 20:48, By: TheBadger, IP: [66.250.23.25]

L2: 401k and age 55Good morning Bill:
I’m a little disappointed that you didn’t answer the un-asked question, so I’ll ask the question and let you answer it.
Granted we don’t know the status of Ed’s three IRA’s … are they just sitting there with no activity; has he taken any distributions and paid the penalty & taxes; or does he have a SEPP Distribution going on any or all of the IRA’s. So Ed, if you can clarify the status of your IRA’s it would be beneficial.
Now for the un-asked question. Assuming no “contributory funds” have been added tosome or all of the IRA’s to create “co-mingled funds,”could Ed’s IRA’s be considerd “conduit IRA’s” and he then transfersome or allback into his “new” 401(k) plan? If he can this will make a much larger pot within the K-plan for him to draw from without penalty.
Thanks.
Jim2006-02-24 08:20, By: Jim, IP: [70.184.1.35]

L2: 401k and age 55Jim, what can I say — maybe a semi-senior moment. However, you are 100% correct. To the extent that Ed can trace one ro more of those IRAs as being conduit or rollover IRAs AND his employer plan permits rollovers; then he can roll those IRAs back into the employer plan thus boosting the balances and ctreating greater flexibility in the distributions he might chose to take over the next 3 – 4 years.
TheBadger
wjstecker@wispertel.net
2006-02-24 09:13, By: TheBadger, IP: [66.250.23.25]

L2: 401k and age 55
Thank you Bill.
Jim2006-02-24 09:55, By: Jim, IP: [70.184.1.35]

L2: 401k and age 55Thanks for your reply..the separate IRAS are made up of a mixture of investments from both my 401k rolled over in 2000 and my lump sum payout in 2000. They were both mixed in as one and put in 3 IRAS. I wont need these moneys till after 59.5 . This extra 110k in my 401k I plan on withdrawing 25k per yr over next 4 yrs along with some other income I have will tide me over nicely.2006-02-24 18:18, By: Ed, IP: [68.84.236.157]

L2: 401k and age 55Well, if you are sufficiently sure that the 25,000 per year is enough, there is no sense in trying to roll these other accounts back to the employer plan. However, after you separate this option would likely disappear if the need arose. In fact, even if you needed the funds and the employer would accept IRA rollovers, if they did not allow partial payments after your separation, there would be nothing gained. You wouldn’t want the tax hit from distributing 4 years worth at one time. You would then have to consider a SEPP for 5 yearsand structure your IRA accounts accordingly.2006-02-24 21:48, By: Alan S., IP: [24.116.165.157]

L2: 401k and age 55Ed:
Thanks for the extra information. If the only source of money in your three IRA’s is from your employer’s qualified plans, (pension lump sum and 401(k)), AND you have NOT added any contributory funds to these IRA’s, then you are free to move any or all of the assets back into your new 401(k). Mixing qualified plan money together is not the “co-mingling” I was referring too.
If you can make the cash flow work on $25k per year from your K-plan and the other income you mention, then it sounds like you have a good plan.
Good luck.
Jim2006-02-25 09:34, By: Jim, IP: [70.184.1.35]