Photo of Ray Ferrara CFP Ray Ferrara CFP Dec 02, 2020

You have been saving for years. You are not quite ready to retire, but it is a lot closer than it is further away. When you are drawing nearer to your retirement, you need to start considering a strategy for when to withdraw and how to use your funds. However, there are strict rules about when you can or cannot withdraw from your 401(k) account. You need to make sure you follow these rules to avoid a penalty fee on an early withdrawal.

When can I withdraw from my 401(k)?

The standard age of eligibility for 401(k) withdrawal is 59 ½ years. Once you reach this age, you can make withdrawals from your 401(k) at any time without any penalties. However, there are a couple of exceptions to this rule that allow you to make eligible early withdrawals:

  • The rule of 55 — Employees who retire, quit or are fired at the age of 55 or older are eligible to withdraw from their 401(k) savings without penalty. This includes leaving your job at any time during the year you turn 55, not just after your birthday.
  • Substantially equal periodic payments — This is considered a Section 72(t) form of distribution, meaning you can make substantially equal withdrawals from your 401(k) based on your life expectancy. Once you participate in substantially equal periodic payments, you must continue to receive them for at least five years or until you reach 59 ½, whichever you reach first. For more information about the rules of life expectancy and applying for substantially equal periodic payments, please visit the IRS’s website.

Talk to a ProVise CFP® professional about planning for your retirement

Whether your retirement is several years away or right around the corner, you need to be thinking now about when you will make withdrawals and how you will use them. Additionally, you may want to consider other sources of supplemental income to help boost your retirement nest egg. 

All this retirement planning can be exhausting, especially when you just want to focus on enjoying your life. Our team at ProVise Management Group is here to help you develop a retirement planning strategy to help you reach your goals.

Our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about retirement planning? Contact ProVise today to schedule a complimentary consultation.