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The Rules for Making Penalty-Free Withdrawals From Your Retirement Accounts

If you withdraw from your 401(k) too early, you may be hit with a 10% penalty unless you left your job after a certain age.

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I have a 401(k) and a 457 plan from jobs I left many years ago. How old do I need to be to withdraw the money without a penalty?

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You generally must wait until age 59½ to withdraw money from a 401(k) or 403(b) employer-sponsored retirement plan without a 10% early-withdrawal penalty, but there is an exception: You can take penalty-free withdrawals before then if you were age 55 or older when you left your job.

And 457 plans, which are generally available to public-sector workers, have an especially generous rule: You can tap the money without the 10% early-withdrawal penalty anytime after you leave your job, regardless of your age.

Keep these rules in mind if you’re thinking about rolling the money over into an IRA. You can roll money from a 401(k), 403(b) or 457 plan into an IRA after you leave your job, and there are benefits to IRA rollovers: You’ll have more investing choices; you can choose the administrator; and you may be able to simplify your finances by consolidating several old plans into one account. But when the money is in a traditional IRA, you’ll have to pay a 10% penalty if you take the money before age 59½.

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