Age 55 Rule
L1: Age 55 Rule
I 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. Thanks
Edit2008-04-08 14:44, By: banker, IP: [18.104.22.168]
L2: Age 55 RuleQ5 — DEFINITELY GO TO A KNOWLEDGEABLE CPA, TAX ADVISOR, OR FINANCIAL PLANNER WHO UNDERSTANDS SEPP 72-T, ETC.
If your present employer will accept the rollover from your former employer, that is the best approach. Then you can make withdrawals of any amount at any time without a 10% penalty, and you don”t need the restrictions and complexities of a SEPP 72-T plan. You would qualify because you will be 55 in the year (2009) that you “separate from service” from the “second” employer.
DO NOT ROLL IT OVER INTO AN IRA because then you must use a SEPP 72-T, and will be “locked in” for the next 5 years, unless this does not concern you, and you want the improved investment flexibility in the IRA vs the 401-K plan(s).
Getting another job, full or part-time will not affect your eligibility, and hopefully won”t escalate you into a higher tax bracket.2008-04-08 15:16, By: dlzallestaxes, IP: [22.214.171.124]
L2: Age 55 RuleHello, Banker:
Q1: Yes, this is possible but you need to ask your current employer if they will accept such a rollover into their 401k plan. While IRS rules allow such rollovers, they do not require the current employer”s plan to accept them. As a result, some employers plans will allow this and some won”t. The summary plan document or SPD for your current 401k plan should explain this and you should be able to get a copy from your HR department.
Q2: If your current employer”s plan accepts rollovers AND allows partial distributions, that will be the best way to go. Again, not all 401k plans allow partial distributions. Many are all or nothing in this regard. Ask your HR department to clarify this issue.
Q3: You can use the SEPP calculator on this site to determine how much your combined retirement plan money can yield in retirement. This changes quite a bit with changes in the Fed mid-term interest rate, which has been declining of late. You can find the current rate on this site as well.
Q4: Working part or full time should have no effect on any of this unless you continue to work for your current employer. That mayor may not complicate these issues.
Q5: The answer to you on this is not straightforward. It is possible to educate yourself on this issue and develop your own withdrawal plan. If you are not confident that you can do this, then by all means find a professional who can assist you. I would be concerned about an advisor who needed to “research” these issues. I would have a lot more confidence in someone who KNEW the issues and how to address them properly.
Ed2008-04-10 10:44, By: Ed_B, IP: [126.96.36.199]
L2: Age 55 RuleThanks for the answers!2008-04-11 16:09, By: banker, IP: [188.8.131.52]