401K – Early Distribution

L1: 401K – Early DistributionMy wife and I are planning to retire in October. My wife will be 55 in September and I was 56 in April. We each have a 401K and would like to take early distribution without incurring the 10 % penalty. We would like to know in detail what we need to do and what forms are required for IRS and from our employer.
Your help would be appreciated.
Thank You.
Bee2003-06-22 15:28, By: bee, IP: [127.0.0.1]

L2: 401K – Early DistributionHello Bee:
Hopefully you each have a 401(k) account with the employer you are anticipating leaving in the next severa months. Secondly, hopefully, each of those 401(k) plans support periodic distributions (check with your respective plan administrators on this).
Assuming the above, you are both entitled to use the “Seperation of Service At 55” exception (See IRC 72(t)(2)(a)(v)). Simply instruct the administrator to make whatever distributions you so desire and impress upon them that the 1099R they send each of you each January should be coded with a reason code of “2”. If they are can not do this, then complete Form 5329 to accomplish the same effect; e.g. avoidance fo the 10% surtax.
TheBadger
wjstecker@wispertel.net
2003-06-22 18:04, By: TheBadger, IP: [127.0.0.1]