OP, a few things to know.
The rule of 55 says that you have to be separated the year you turn 55. Depending on which month of the year your birthdate is, it can be technically when you are still 54.
One over-arching question I have, if you are still employed, why would you need to use your 401k for? Do you have needs that would exceed your income by a large margin? Why would you need to go through all the gymnastics if you're still deriving an income.
Also, note, you will want to check with the plan administrator about the rules of the plan, as some can be onerous. Some plans require you to take the entire distribution at once, and not allow partial withdrawals. Also, check if your 401k plan has good investment options at a reasonable cost, since you will have to leave the money in the plan, you can't roll that over into an IRA or a different 401k plan and use the money penalty free.
But regardless of the above, it really depends on the nature of the relationship you have with your employer. In most companies, only FTEs qualify for 401k plans. If you separate the year you turn 55 and then continue to work for your employer as a contractor (presumably employed by some other vendor company), then you can use the rule of 55, notwithstanding issues above.
So check if your position as a contractor allows you to participate in the 401k plan of your current employer. And make sure you understand why you would want to do this in the first place. Good luck, good problem to have.
The rule of 55 says that you have to be separated the year you turn 55. Depending on which month of the year your birthdate is, it can be technically when you are still 54.
One over-arching question I have, if you are still employed, why would you need to use your 401k for? Do you have needs that would exceed your income by a large margin? Why would you need to go through all the gymnastics if you're still deriving an income.
Also, note, you will want to check with the plan administrator about the rules of the plan, as some can be onerous. Some plans require you to take the entire distribution at once, and not allow partial withdrawals. Also, check if your 401k plan has good investment options at a reasonable cost, since you will have to leave the money in the plan, you can't roll that over into an IRA or a different 401k plan and use the money penalty free.
But regardless of the above, it really depends on the nature of the relationship you have with your employer. In most companies, only FTEs qualify for 401k plans. If you separate the year you turn 55 and then continue to work for your employer as a contractor (presumably employed by some other vendor company), then you can use the rule of 55, notwithstanding issues above.
So check if your position as a contractor allows you to participate in the 401k plan of your current employer. And make sure you understand why you would want to do this in the first place. Good luck, good problem to have.
Statistics: Posted by idc — Tue Feb 25, 2025 1:41 am — Replies 18 — Views 1230