Withdrawal of interest

L1: Withdrawal of interestI am 58 years old and will be without a job come end of the year. I plan onrolling overmy 401k and pension buy-out ($700,000) to an IRA. My question is, can I withdraw the interest only from the IRA without being penalized? I won”t be 59 1/2 until 6-082006-08-24 12:21, By: ken, IP: [144.160.98.31]
L2: Withdrawal of interestIt depends if the whole 401k is from the same job. If you retire after 55, the penalty doesn”t apply. It appears from what you are saying you are retiring over 55 years of age and the rollover is from the same job you have had for some time. The penalty would NOT apply. If you had worked somewhere else a couple of years ago and left before age 55, and co- mingled the money from that rollover to this one, that”s another story.2006-08-24 12:35, By: chuckles8888, IP: [64.219.118.201]

L2: Withdrawal of interestYou can”t make any withdrawals form the IRA without penalty until after age 59.5.
If your employer allows, best bet would be to leave the funds in the 401(k) and make your withdrawals from there. Once you are 59.5 you can then move the funds to an IRA and make the withdrawals from the IRA.2006-08-24 12:36, By: Gfw, IP: [172.16.1.73]

L2: Withdrawal of interestThanks, Chuckles! You are correct, it is the same company. Haven”t had any other job (after 32 yrs)!2006-08-24 12:37, By: ken, IP: [144.160.98.31]

L2: Withdrawal of interestJust a point of clarrification.
While the funds are in the 401(k) the age 55 exemptionto the 10% penalty applies – if the funds are moved to an IRA the age 55 exemption is lost and the IRA rules and the age 59.5 rule applies.2006-08-24 12:46, By: Gfw, IP: [172.16.1.73]

L2: Withdrawal of interestKen:
The response from “chuckles8888″ needs some clarification because it hits at but doesn”t quite get the facts right.
It depends if the whole 401k is from the same job. If you retire after 55, the penalty doesn”t apply. It appears from what you are saying you are retiring over 55 years of age and the rollover is from the same job you have had for some time. The penalty would NOT apply. If you had worked somewhere else a couple of years ago and left before age 55, and co- mingled the money from that rollover to this one, that”s another story.
1. If your money is in an IRA the age for penalty-free withdrawals is 59 1/2. If you retire / Separat DURING or AFTER the year of your 55th birthday, and IF the 401(k) will allow periodic distributions, which could be a single distribution, then the 10% penalty doesn”t apply. Once you rollover to an IRA your lose the age 55 penalty exemption. It”s now an IRA and not a 401(k).
2. The penalty exemption described in Item # 1 applies to the 401(k) at your employer where you retire / separate during or after your age 55 birthdate year. The money in this K-plan could come from this single employer, which appears to be your case, or it could contain funds from one or more former employer”s K-plan(s), or from a Rollover IRA from a former employer and this Rollover IRA only containes “qualified money.” That is to say you have not “co-mingled any contributory IRA” money with the Rollover IRA which ends your ability to move this money back into another company”s K-plan. So you are not limited to funds only from your current employer.
3. Taking “interest only” does not exempt you from the 10% early withdrawal penalty.
I hope this helps.
Jim2006-08-24 13:04, By: Jim, IP: [70.184.2.72]

L2: Withdrawal of interestKen,
I think it has been established that if you can take around 18 months of living expenses out of your 401k, there will be no penalty due to the age 55 exception. Don”t take it until next January, so it will not be added to your 2006 taxable income.
That gets you to age 59.5, when you can consider:
1) NUA on any highly appreciated employer shares; with 32 years with the same company, this could be a near bonanza for you. Attaining age 59.5 is a new qualifying event for NUA. This would be part of a lump sum distribution. You would ask for a quote on your cost basis so you could analyze the NUA option.
2) The rest of your 401k would then be directly transferred to an IRA account. There would be no withholding tax or penalty. You would then be free to take IRA distributions without penalty and this would be totally at your discretion until age 70.5 when RMDs must begin. This would have to be done in the same year as the NUA distribution because of the NUA lump sum distribution requirement.
3) If you have any option to the pension buyout date, consider how they choose interest rates. You want the lowest rate possible applied since that produces the largest lump sum.
4) Consider periodic Roth conversions starting next year when your income will be lower and before you start SS. This provides the opportunity to convert at a lower tax rate than what you will likely be paying in retirement after you get SS and RMDs begin. The Roth will not be subject to RMDs, the earnings will be tax free, and the RMDs for what remains in your traditional IRA will be reduced.
2006-08-24 17:36, By: Alan S., IP: [24.116.68.91]

L2: Withdrawal of interestKen,
Alan”s scenario for you is really good advice. If you have a large amount of company stock with Net Unrealized Appreciation (NUA), this can be a really great deal for you, but dealing with it has a few mines in the field that you need to watch for.
1. Getting the cost basis from your employer: Yes, there is someone in your company with this information, and you may get lucky with the first person you talk with but don”t expect it. Keep pounding until you find that person with the cost basis information.
2. Evaluate whether utilizing the NUA option if in your best interest. It may be more advantageous to treat it like another asset and pay ordinary taxes. All will depend on the amount of stock and the NUA value. Get help.
3. If you are going to do the NUA process, there is a sequence of steps you MUST follow. Like Alan said, it must all be done within the same calendar year … the IRA rollover of other assets and the transfer to a non-IRA brokerage account for the stock. If you do the NUA distribution, the 401(k) account MUST ONLY CONTAIN THE STOCK! This means you must rollover all other assets to the IRA before you start trying to move the stock. This takes time so if you have not started the process by about August of maybe September, DON”T START NOW. There”s not enough time. Wait till next year, which makes Alan”s point about limiting your income this year so much more important.
4. There are some new rules about Roth IRA conversions that have gone into effect this year and over the next few years. Check into this.
Hope this helps.
Jim
2006-08-25 10:17, By: Jim, IP: [70.184.2.72]

L2: Withdrawal of interestI”m confused with the 401-k withdrawal regulation after age 55. When I was 53 I left a previous employer and rolled that 401-k to my new employers plan. At age 56, I left the new employer and now want to take a distribution from the 401-k plan. As long as I”m over 55 when I left the new employer is there any problem taking the distribution from that 401-k plan without the 10% penalty??2006-08-25 12:10, By: yankee, IP: [68.9.94.222]

L2: Withdrawal of interestNo problem at all. You also have no limitation of amount that gets the age 55 exception even though the lion”s share of the 401k may well have come from the company you separated from at 53. The entire account get the age 55 exception. So now that transfer into the employer plan instead of an IRA looks pretty good. Only problem would be if they do not offer any installment of partial withdrawal options. In that case, you would probably have to split it up between a penalty free distribution and an IRA rollover.2006-08-25 19:24, By: Alan S., IP: [24.116.68.91]