Can I withdraw from my 401(k) if I leave my job and I’m over 55?


Q. Can I withdraw from my 401(k) if I leave my job and I’m over 55?
— Planning

A. As you know, there are rules about when you can withdraw from retirement accounts without facing tax consequences.

Here are the rules.

With a 401(k), an employee contributes a portion of their income into the account, said Stephanie Spies, a certified financial planner with Modera Wealth Management in Westwood.

Employees often contribute pre-tax dollars to these accounts and the funds in the 401(k) are permitted to grow tax-deferred until withdrawal in retirement, she said.

Upon withdrawal, the funds are then subject to federal income tax and potentially state income tax.

Because the purpose of 401(k) accounts is to save for retirement, the IRS imposes penalties on early withdrawals from these accounts, Spies said.

“Penalty-free withdrawals from retirement accounts begin after age 59 ½, but income tax implications still apply,” she said. “Early withdrawals from retirement accounts may be subject to an additional 10% penalty. However, the IRS permits penalty-free withdrawals under special circumstances or exemptions.”

One of the IRS exceptions is referred to as the “Rule of 55,” which is separation from service from your employer after age 55, or age 50 for certain public safety employees, she said.

To qualify for a penalty-free withdrawal under the “Rule of 55,” the 401(k) from which withdrawals are initiated must be from the company that you just separated from, not another employer, she said.

The “Rule of 55” does not apply to IRAs, she said.

A full list of exemptions to the 10% penalty can be found on the IRS website.

“Based on your situation, you may be able to withdraw from your 401k penalty-free after leaving your job, although you will still be subject to federal and possible state taxes on the withdrawals,” Spies said. “To make sure you meet all of the qualifications, we recommend that you confirm with your tax professional before moving forward with withdrawals.”

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This story was originally published on Oct. 21, 2022. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.