Age 55 Rule
L1: Age 55 RuleI retired from my previous employer at age 53, and am now age 54 andworking for another firm. Would I be able to set up an SEP from my Pension (defined contribution plan) and 401k plan from my previous employer if I continue to work full time or part time? Also, would I use the combined balancs of my pension and 401k plan, both of which are now administered by an Investment Company, or would I need to roll them over to an IRA in order to make the SEP work? Thanks2007-11-09 15:51, By: banker, IP: [188.8.131.52]
L2: Age 55 RuleIf you need the income right away, the IRA rollover is best, because using the IRA gives you better control of the SEPP. While some employer plans support a SEPP, most of them do not and error are generally more likely and harder to correct before they end up busting the plan.
Another possibility to consider is whether your new employer”s plan will accept a transfer from the prior employer plan or plans. If so, you would have the total balance there, and if/when you separate from the present firm in the year you turn 55 or later, your withdrawals escape the penalty. But do not consider doing this if the new plan would not allow installment withdrawals, preferably adjustable installments. If you are 54 now, that means that you would be eligible for the age 55 exception in January, but you probably do not have much of a balance in the current plan.
If you go the more traditional route, and transfer the prior plans to an IRA, you should partition the IRA into at least two accounts so that the one that you want to take SEPP withdrawals from has the starting balance to generate the income you need. There is a reverse calculator on this site to determine what this balance is. While you are still working, it would be wise to avoid taking too much out of your existing retirement funds, but that”s another issue.
2007-11-09 21:01, By: Alan S., IP: [184.108.40.206]
L2: Age 55 RuleI am following up on a message I posted on here late last year.The advice appeared to be good, but I just want to double check before I proceed. My background:I retired from my previous employer at age 53, having a pension plan (defined contribution) of about $700,000 and a 401k plan of around $200,000. I then went to work at another bank and have about $25,000 so far in their 401k plan after almost 2 years of work. As I will be 55 later in the year, I have been contemplating leaving my current employer at the end of the year. I have been contemplating setting up an SEPP starting 1/1/09 when I will be 55 1/2, and run it for 5 years until I am 60 1/2. I would like to withdraw about $60,000 per year (Iown some rentals that will be paid off in 10 years so I am not too worried about withdrawing too much from my retirement/401k accounts, and I will probably work part-time just to keep active). I mention the SEPP plan to my accountant who does my taxes and he said that he would have to research to learn more about SEPP plans.So a few questions. Question 1) Is it possible to roll my 401k andpension fund balances from my old employer to my current employer at my current age of 54, and then if I leave after age 55 (after having worked there for only 2 years) and just withdraw the funds from my most recently employer with no 10% penalty? Question 2) If the question to #1 is yes (I know I will have to confirm with my existing employer if they will accept the transfer and allow periodic withdrawals), should I do that or roll those funds into an IRA and withdraw without the 10% penalty? Question 3) If the answer to Question 1 is no, should I then set up the SEPP, and would it provide the $60,000 annually that I will need? Question 4) Would working part-time impact any of this? Finally Question 5) Should I seek the help and guidance of a “retirement specialist” who can advise me and ensure that I make the right choice and avoid the 10% penalty? I apologize for so many questions, but I only have a few more months before I reach 55 and I do want to do this correctly. Thanks2008-04-08 14:41, By: banker, IP: [220.127.116.11]