Does the 10 % penalty apply for distributions from a 401k at age 55 if employment is seperated?

Answer 1

If you are severed from your employment, you have 60 days to roll over your 401(k) without penalty, unless you are 55 or older, in which case you can take your 401(k) proceeds without penalty. Ask your benefits provider.

Answer 2

Yes, the penalty applies for any distributions before age 59 1/2 unless you are totally and permantly disabled or use the funds to pay medical expenses that exceed 7.5% of your AGI.

If you leave employment you can roll over your 401(k) into an IRA or other tax-deferred plan without penalty. The timeframe for the rollover depends upon the plan rules.

Some plans can be left in place. Typically you can leave it in place if you have more than a certain amount of money in the plan. If you have less you'll have to roll it over into another tax-deferred plan. That could be an IRA or a 401(k) at a new employer if the empolyer allows rollover deposits to the plan. Not all employers allow that, but many do.

Answer 3

Not if you start by annuitising your 401k and take distributions at the same level for no less than 5 years. That is about the only way I know of. you will pay income tax, but no penalty.

Answer 4

Yes. The penalty applies until you are 59 1/2.