To clarify.... you can take withdrawals of your taxable 401K funds after TERMINATING from your job at age 55. (can't do this if the funds are Roth contributions, those are stuck until age 59 1/2 along with the five year hold)
So, if you quit your job and have attained the age 55 and leave your 401K in place, you can withdrawal any amount of the taxable portion and simply pay any applicable tax.....there is no 10% penalty. Now, if you move those funds from a 401K into an IRA that your college buddy can manage for you.....you've just screwed yourself because the rules of the IRA are age 59 1/2....whereas the rules on the 401K are age 55.
What if you continue to work and are age (anything over 59 1/2)?.you can do an "in service withdrawal" and pull some funds out for whatever reason even though you are still employed and putting funds into it. Since you are of retirement age, the 10% penalty is gone.
So you have a window from age 55 to 59 1/2 that "if your plan" is to roll from your 401K into an IRA.....you might want to reconsider that move until you hit age 59 1/2 OR, only move a portion.....leaving behind in the 401K an amount that you feel would hold you over to age 59 1/2....
THEN AGAIN.....you want to make sure that your 401K allows partial distributions after you separate from service. Some 401K's do NOT which means if you're age (enter any age) and you want to simply take $1,000 out of your $900,000 401K.... you can't. You have to take it all or none. This is your 401K's polite way of saying "you've terminated.....please move your account somewhere else"
Don't wait until needing that money is critical before you discover your 401K doesn't allow partial distributions.
I guess what I called penalty is the higher tax I'd pay retiring before 59-1/2, if I understand you correctly.
I was not aware once I retire I'd have to move my retirement funds. Our company 401K is with Fidelity and I suspect I can stay with them but may just need to move into a different account. I plan to sit down with a financial/retirement specialist in a couple years to learn what I need to learn and start making preparations.
Fidelity has offered many different webinars on retirement and other subjects. I have been able to attend a couple but not any have discussed the moving of funds or minimum withdrawls, etc.
As is often the case, sometimes you don't know what you don't know. I appreciate everyone's contributions to this thread.
Our plan is once I can retire, is to move to a more retirement friendly state, OK, MO, AR, TN, KY but still keeps us somewhat centered around family in OK and MO and maybe TX if my Son stays here after college. the rest of my Family is in NC and FL.
We hope to homestead and grow as much of our own food as we can, I want to hunt for everything I can (I have a lot to learn there), we already have 4 chickens, we have even considered bee keeping. Forgot to mention a few cows, I grew up raising beef cattle and miss being around some.
I also hope to keep Jeeping and ATVing as much as I can, many of our friends older than us still jeep. We may even keep boating in the summer although I may see if my son will buy the boat from me if he wants, if not, I'll sell it, just don't use it as much as we did the first 20 years.
So we will have plenty to keep us busy and hopefully healthy.
