I was 54 at the time of the separation but turn 55 the same year. does this qualify under rule of 55.
Directly to your question, the YEAR in which you turn 55 is what is important and based on that limited information, generally, the withdrawal from your 401(k) would be penalty free. That does NOT mean tax-free...you will still have to pay taxes.
That being said, there are a lot of other factors to consider when taking a distribution out of your 401(k) or any other retirement plan. Before making any decisions, you should discuss with a fee-only advisor that can help you lay out your options and show you the pros/cons to taking that distribution.
Hi Jerry, you can withdraw money from an IRA, and perhaps from your 401(k), penalty free, though distributions would still be subject to federal and, if applicable, state and local income taxes. There is a type of distribution, available to those who are at least 55 years old, known as a Series of Substantially Equal Periodic Payments, or SSEPP for short. Under this scenario, you could take money from your account, provided payments occur at least once a year, and payments last at least five years. You will need to check with the firm that handled your former employer's 401(k) plan, to determine whether you can take these distributions from your 401(k), or whether you would need to roll the kplan balance to an IRA first. Note that these distributions are subject to income tax, and there are several other considerations to them. Therefore, we would strongly suggest that you discuss the details of this with a professional. As noted by others, we would recommend a fee-only planner, for some advice specific to your situation. Hope this helps.