401K roll over to an IRA, do I have to retire during the year I turn 55?
L1: 401K roll over to an IRA, do I have to retire during the year I turn 55?This is for a new SEPP.
My birthday is Dec 24, 1962
Planning on a January 2017 distribution start.
I plan on using one of the two methods other than RMD so I can always reduce in years to come.
I have $409,822 in my 401K now.
I read on a website I needed to retire, get fired or quit in the year I turn 55 with my money in a 401K and wondered if that is right? My company has a very simple process to roll my money over to an IRA and I plan on using USAA for my IRA. My company had me go on FMLA instead of retiring on Oct 27th which is good for the annual bonus program. My FMLA expires on Dec 21st and I can get them to extend my time through the end of December and retire on Jan 1st 2017 which matches my year of turning 55. My vacation payout has ended and I received my last amount of funds to my 401K now. If I can roll my money over now or at the beginning of December I believe I will be able to start the SEPP payments on the 5th of Jan 2017 making it easy to get the exact same amount each month for the year matching the SEPP required annual payment.
Please let me know if I have to wait till the year I turn 55 or not. Also thank you for an awesome site helping people with this process.2016-11-17 17:06, By: Lamopar, IP: [188.8.131.52]
L2: 401K roll over to an IRA, do I have to retire during the year I turn 55?The age 55 exception will often enable you to avoid a SEPP, which carries the risk of retroactive interest and penalty if you bust the SEPP. While you could do an IRA rollover and start a SEPP anytime, since you would qualify for the exception if your separation date from your current plan is anytime starting 1/1/2017 or later. Check with your plan administrator on two things:
1) Can your retirement be set up for January and will any distributions directly from the plan be coded 2 on the 1099R (2 indicates the age 55 exception)?
2) Will the plan allow you to take flexible distributions? You only really need one distribution a year, but you might find quarterly to be more convenient.
Note that the age 55 rule has nothing to do with IRA accounts. Distributions must come directly from the 401k plan. If you roll over to an IRA, you lose the exception and would be forced into a SEPP. Once you reach 59.5, you would then do the IRA rollover.2016-11-17 18:26, By: Alan S, IP: [184.108.40.206]
L3: 401K roll over to an IRA, do I have to retire during the year I turn 55?I agree with Alan.
1. Even though you will not become 55 until Dec 2017, the rules allow you to take a distribution at anytime during the year that you are, or will become, 55 years old.
2. Your “separation from service” date must be in the same calendar year as you become 55. So, as Alan said, you have to make sure that your termination date is in 2017. I would not use 1/1/2017 because it is a non-working holiday, and also because any payroll due that day might be paid by the company on the last preceding workday, which would be in 2016, and that would void the 401-K/age 55 exception. To play safe, I would suggest asking for your termination to be the first regular paydate in 2017, i.e. 1 or 2 weeks.
3. This way you can take periodic distributions of any amount whenever you wanted to, or did not want to take.
4. You would eliminate any concern or possibility of busting a SEPP 72-T before 59 1/2.
5. HOWEVER, BEFORE YOU DO ANYTHING, ASK HR/401-K ADMINISTRATOR IF THERE IS COMPANY STOCK IN YOUR 401-K. IF THERE IS, ASK THEM FOR YOUR “NUA” COST BASIS. IF THE CURRENT VALUE/SHARE OF THE COMPANY STOCK IS “SIGNIFICANTLY OR SOMEWHAT” HIGHER THAN THE COST BASIS, THEN YOU PROBABLY SHOULD READ ABOUT THAT ON THIS WEBSITE, OR IN J K LASSER “YOUR INCOME TAX”, OR THE APPLICABLE IRS PUBLICATION ABOUT RETIREMENT PLAN DISTRIBUTIONS. IT COULD SAVE YOU A LOT OF TAXES IF YOU QUALIFY.2016-11-17 19:37, By: dlzallestaxes, IP: [220.127.116.11]