Here’s how it works: If you leave your job in the year you turn 55 or later (age 50 for certain public safety workers), you can withdraw money from your current employer’s 401(k) or 403(b) without paying that penalty. You’ll still owe regular income tax, but the extra 10% penalty is waived.
A few key points to remember:
- It applies only to the plan from the employer you just left — not old accounts or IRAs.
- You must separate from service in or after the year you turn 55.
- Rolling the money into an IRA will eliminate the Rule of 55 benefit.
Used wisely, this can bridge the gap between an early retirement and other income sources like Social Security or pensions.
Bottom line: The Rule of 55 can be a smart way to access your retirement funds early — just be sure to plan for the tax bill and your long-term income needs.
Thinking about an early retirement strategy? Reach out to the financial advisors at Kerr Wealth Advisors in Blue Bell, PA. Let’s talk through how the Rule of 55 could fit into your plan — and whether it’s the right move for your long-term financial health.
H. Brad Kerr IV, Vice President/ Wealth Management, Financial Advisor
215.619.3926/ bkerr4@janney.com
1767 Sentry Parkway West Suite 110 Blue Bell, PA 19422
