If you want to retire early and are thinking about using the little known 55t rule then you may want to keep a few things in mind. Many people ask us about retiring early with this rule but sometimes they get the rules confused.
We’re an investing service that also helps you keep your dough straight. We’ll manage your retirement investments while teaching you all about your money.
—Ready to subscribe—
For more information visit:
www.JazzWealth.com
— Instagram @jazzWealth
— Twitter @jazzWealth
Business Affairs 📧Support@JazzWealth.com…(read more)
LEARN MORE ABOUT: 401k Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Saving for retirement is a crucial aspect of financial planning, and for many Americans, their primary vehicle for retirement savings is a 401(k) plan. One important rule that many people may not be aware of is the 55t rule, which can have significant implications on how and when you can access your 401(k) funds.
The 55t rule, also known as the Age 55 Rule, allows individuals who separate from their employer in or after the year they turn 55 to make penalty-free withdrawals from their 401(k) plan. Normally, withdrawals from a 401(k) before the age of 59 ½ would incur a 10% early withdrawal penalty. However, under the 55t rule, individuals can access their funds without this penalty if they meet the age requirement and leave their job in the year they turn 55 or later.
It’s important to note that this rule only applies to funds in your current employer’s 401(k) plan and not to funds in previous employer plans or IRAs. Additionally, while you can withdraw funds penalty-free, you will still have to pay income tax on the amount withdrawn unless it is a Roth 401(k).
Another important thing to know about your 401(k) is the limits on contributions. In 2021, the maximum contribution limit for an individual is $19,500, with an additional catch-up contribution of $6,500 for those aged 50 and older. By maximizing your contributions, you can take advantage of tax-deferred growth and compound interest to build a significant nest egg for retirement.
It’s also important to consider the investment options available within your 401(k) plan. Many plans offer a variety of investment choices, from stocks and bonds to mutual funds and target-date funds. It’s crucial to review and diversify your investment portfolio to ensure you are well-positioned for growth while managing risk.
Lastly, it’s important to regularly review and adjust your 401(k) contributions and investment choices as your financial goals and life circumstances change. Consulting with a financial advisor can help ensure you are on track to meet your retirement goals and make the most of your 401(k) savings.
In conclusion, understanding the rules and options available within your 401(k) plan is essential for successful retirement planning. By familiarizing yourself with the 55t rule, contribution limits, investment options, and the importance of regular review and adjustment, you can make the most of your 401(k) savings and achieve a financially secure retirement.
When using the rule of 55 can i withdraw any amount any time i need or does it beed to be a fuxed periodic payments like 72T rule?
I just turned 55 years old. If I quit my job, I have access to my 401k without penalties. What happens if I start working for the same company 6 months later? Do I still have access to the 401K without penalties?
Do you have to ensure your company’s plan supports this?
What would happen if you retire at 55 and start taking Rule of 55 distributions but end up getting a different job at age 57. Would you have to stop taking Rule of 55 distributions?
Great video! Can the rule of 55 work if I have a Solo 401K that is Traditional?
Amazing how this isn't widely known. I've brought it up multiple times to have someone want to argue and insist it's in concrete – 59.5…. Wanting / planning to take advantage of it myself… Thanks for the vid
Then what the hell is the use of everyone thinking 59.5 is ?The number.
I used this IRS Rule of 55. I got a good retirement package at 56. So many financial planners never mention this Rule to their client. It worked well for me.
I am 54 and will be 55 this year in August. I have nothing in my 401k (Less than 40k) but I have not much in savings or checking and I have medical bills. Can I quit and start using 401k for my bills and get another job? If I could just have access to money for bills, like 10 grand would be all I need. Not everyone had a good life and not everyone has a million dollars.
great video
I'm curious, I left my employer at 49. And now I'm 55, my question is if I return to work at this company now and then leave again will I be eligible to use this rule? Thanks for good info!
This is great
So 401k withdrawal can be once or more using this rule? But IRA.’s must be 5years of equal distribution?
This is the question I’m still trying to process since when I asked this question to my work hired adviser he said it must be a 5 year plan of equal distributions. Regards
401ks are a joke. Your money is locked up until you either leave your job or retire.
Excellent content. I just discovered the 55t rule last week and while I won’t be retiring next year when I turn 55 I think 57.5 will work.
Great explanation
all true, don't think that you can escape the tax man, you can only escape the extra 10% tax penalty by not waiting for the usual 59 1/2 age if you have not retired or quit yet, or fired.
I have both a 401K and an IRA. If I were to try and retire at 55, wonder what is the better option, roll over the 401K into an IRA and do the 72t, or vice versa and do the rule of 55. I've read that IRA gives you more investment options than a 401K so not sure. Reason I want to combine it into one is because to me, it would seem better to have one lump sum that you can withdraw from.
Does this apply to Roth IRA?
or you can take it out using the 72(t) rule
Does the rule of 55 apply to a Roth 401(k)? I haven't been able to find a straight answer anywhere and none of the videos I've seen anywhere addresses it.
Does this apply to a Roth type 401k?
great information. i asked our company about the 55 rule and if we had it. they said it's an IRS rule so ya every company has it. i'm not to happy here, turning 55 in 3 weeks, good to know now i can leave any time i want now. was hoping to get 7 more years in. we'll see.
What if you are already 55(or in your year you turn 55) and you leave company A. You leave your 401K with company A. You start a new job at company B and a year later(or whenever) you decide you are done with company B. Are you locked out of the 401K with company A until 59.5?
Can you roll IRA money into a 401k?
I wanted to know if you could explain more I actually just called on my 401k through fidelity. Which is a Target fund 401K Roth. 34 years old was planning to retire at 59 and a half so I did not have to pay penalties.
I just got off the phone with fidelity they told me there is no such thing as a 55-t rule. If you retire before 59 and a half you still will be hit with a 10% penalty fee. I was wondering if you could clear this up for me cuz I'm not understanding? Thank you
Finnaly. Really good explanation.
Make sure your 401k plan allows the withdrawals after you separate. Some employers provide limited options for what you can do with the 401k. As an example, some only allow you to leave the money in the plan until you take the full distribution, which can be rolled over into your IRA, but you can’t use the 55 rule in the IRA. (72t would still be an option)