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.
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?
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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
-
Is a Phased Retirement Right for You?
Want to keep working, just not as hard? A phased retirement may just be the answer.
By Kimberly Lankford Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
7 Things Medicare Doesn’t Cover
Healthy Living on a Budget Medicare Part A and Part B leave some pretty significant gaps in your health-care coverage. But Medicare Advantage has problems, too.
By Donna LeValley Last updated
-
Is a Medicare Advantage Plan Right for You?
Medicare Advantage plans can provide additional benefits beneficiaries can't get through original Medicare for no or a low monthly premium. But there are downsides to this insurance too.
By Jackie Stewart Published
-
Medicare Advantage 2024 Plans Dip in Ratings
Medicare Advantage and Medicare Part D plans lose 'star' on the CMS performance score card.
By Joey Solitro Published
-
Considering a Medicare Advantage Plan? Be Wary of Promises
These private insurance alternatives to Medicare are growing in popularity at the same time they’re under scrutiny for their sales tactics and coverage.
By Elaine Silvestrini Last updated
-
Medicare Open Enrollment Ends Soon — Here's What You Need to Know
Medicare open enrollment ends in less than a week. Here's what you need to get done.
By Elaine Silvestrini Last updated
-
4 (Imperfect) Ways Retirees Can Pay for Dental Care
health insurance Since Medicare doesn't provide dental benefits, seniors must consider other options to cover this need.
By Jackie Stewart Published
-
Get Free Over-the-Counter COVID Tests Through Medicare
Medicare Beneficiaries can get up to eight tests a month through both original Medicare and Advantage plans.
By Elaine Silvestrini Published
-
Biden's Spending Framework Limits Medicare Expansion
Medicare The Medicare expansion in President Joe Biden's $1.75 trillion spending plan included fewer new benefits than some Democrats had hoped for.
By Jackie Stewart Published