Rule of 55
retirementAlso known as: rule of 55, separation from service exception
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
IRC Section 72(t)(2)(A)(v). Only applies to the 401(k)/403(b) of the employer you separated from in or after age 55 (50 for public-safety officers). Money rolled to an IRA loses Rule-of-55 protection — early IRA withdrawals require Rule 72(t) SEPP or another exception. Ordinary income tax still applies; only the 10% penalty is waived. Useful for early retirees who keep money in the old employer's plan to access it penalty-free during the bridge years before 59½. Some plans force a lump-sum distribution at separation, defeating the strategy — check the plan document.
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