[Subscribe to Daily Digest] |
[Main General Bulletin Board | BBFAQ |
Prev by Date | Next by Date | Post Followup ]
Member Login / Signup - Members see fewer ads. - Latest Member Gallery Photos
The quiet advantage of 401(k) versus IRA Posted by MI-Roger [Email] (#882) [Profile/Gallery] (more from MI-Roger) on Wed, 5 Jun 2013 03:35:35 In Reply to: 59 1/2 ??, Mike Lynch [Profile/Gallery] , Tue, 4 Jun 2013 13:58:50 Members do not see ads below this line. - Help Keep This Site Online - Signup |
The 59-1/2 age limit applies to IRA funds.
The quiet advantage of 401(k) funds is that if you retire (the IRS uses the term 'service separation' which might include unplanned lay-off too) within the calendar year that you turn age 55 or later, then you can immediately withdraw your 401(k) funds without the additional 10% tax penalty. You choose when, how much and how often. You must pay ordinary income tax on these withdrawals but not the penalty.
If you retire before the calendar year in which you turn 55 you must either wait until you are 59-1/2 (just like IRAs), or initiate a rule 72(t) withdrawal plan that is keyed to actuarial tables, or pay the 10% penalty, or use the money exclusively for a limited number of IRS approved exclusions. With the 72(t) actuarial table distribution you get no choice of how much you will receive each month, and I understand it is very difficult to turn off this flow of funds in the future (i.e. you lose your job and get re-employed many months later after you started the distributions).
Talk to a Tax Professional. I know just enough to be dangerous!
_______________________________________ Saabs owned: 2008 9-5 Aero Sedan, sold at 227K miles 2006 9-3SC 2.0T - Wife's daily driver 2000 Viggen Convertible - Sold May, 2022 1964 Quantum IV Formula Car - Retirement project 2000 9-5lpt Sedan, sold at 318K miles
No Site Registration is Required to Post - Site Membership is optional (Member Features List), but helps to keep the site online
for all Saabers. If the site helps you, please consider helping the site by becoming a member.