Ask Terry Questions Fired from job at age 55 before end of year fired

Fired from job at age 55 before end of year fired

By Terry Savage on March 18, 2018 | Financial Planning / Retirement

I understand I can take distribution at 55 without penalty because I am fired in the year I become 55. Questions is, if I take a part time or full time job again in the following year does this create a problem to deal with.

Terry Says

Before I explain how this works, let me strongly advise you NOT to do it.  If at all possible, you want to roll over your current 40l(k) plan -- or 403(b) -- into an IRA rollover, which will keep the money growing tax-deferred until your retirement!  It may look like you need the money now, but believe me, you'll need it a lot more when you reach age 70! You are referring to a portion of the tax laws known as Rule 72t.  That allows you -- once you reach age 55 -- to take money out of your retirement account in substantially equal payments designed to deplete the account over your lifetime -- WITHOUT paying the 10 percent tax penalty for early withdrawals.  You'll still owe ordinary income taxes on the withdrawals, however. These withdrawals must last at least 5 years, until after you reach age 59-1/2.  And there are several methods for calculating them.  For more information on Rule72t and calculators to estimate withdrawals based on your situation go to this link. And, in answer to  your other question, you could sign up for a new 40l(k) plan if you get another job -- but you must continue these withdrawals on schedule.  Again, I urge you to just roll over the entire account to Fidelity or Vanguard, where they will give you advice on asset allocation and which funds to use -- at no charge.        

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