401(k) and pre 59 1/2 distribution.

L1: 401(k) and pre 59 1/2 distribution. I will turn 55 in January, 2004 and anticipate retiring shortly thereafter. I have heard that there is an exception to the 10% early withdrawal penalty if distributions are taken from a 401k plan by an employee who is 55 yrs old and separated from service. If this is so, do I have to withdraw the entire balance lump sum and pay the taxes at that time, or can I take the money out as I need it and pay taxes as I take it out? If the latter, then will I be locked into a 5 year SEPP? I plan to take a year or so off after I retire, then I will find some part time work until I”m 62 or 65.I also have some money in a pension plan, and I will roll this over into an IRA, taking SEPP distributions out of this for the next 5 years. My idea is to see if I can withdraw from the 401k on an as needed basis, to use as a supplement to the SEPPs and PT job income.2003-12-11 13:41, By: Ray, IP: [127.0.0.1]
L2: 401(k) and pre 59 1/2 distribution. Hello Ray:
You qualify for the “Separation At Age 55 Rule” which allows unlimited & varied distributions to you without following a SEPP plan. However, there are some rules: (1) You separate from your employer; (2) You separate from your employer during the year you attain age 55 or greater; (3) The assets stay in the plan; they may NOT be rolled over to an IRA.

Once you qualify, when, how, how often, etc. you make distributions is strictly between you and your plan administrator.
TheBadger
wjstecker@wispertel.net
2003-12-11 14:06, By: TheBadger, IP: [127.0.0.1]