The Rule of 55 allows you to take penalty-free 401 (k) withdrawals if you leave your job the year you turn 55 or older. Public safety workers may be eligible for penalty-free distributions the year they turn 50 or older. Usually, you'll face a 10% penalty for 401 (k) distributions you take before age 59 1/2. What is the rule of 55?
What is the 401(k) rule of 55?
The rule of 55 is an IRS policy that allows workers to take early withdrawals from their employer-sponsored retirement accounts, such as 401 (k)s and 403 (b)s, at age 55 or older without paying a 10% penalty provided that they leave their jobs. It only applies to accounts you have with your current employer.
Can you get a 401(k) if you leave a job at 55?
To be eligible for the rule of 55, you’ll need to leave your job during or after the calendar year in which you turn age 55. The rule allows penalty-free 401 (k) withdrawals for workers between ages 55 and 59 1/2 who leave a job during that age range.
