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By : Raam Dhakad
KYD - Personal Finance
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Many companies have retirement plans that allow employees to take advantage of the Rule of 55, but your company may not offer the option.
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"401(k) and 403(b) plans are not required to provide a 55 withdrawal rule, so don't be surprised if your plan doesn't allow it,"
"Many companies see this rule as an incentive for employees to receive penalty-free distributions, with the unintended consequence of prematurely draining their retirement savings,"
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The conditions that must be met and other things to consider before taking the 55 Withdrawal Rule.
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Your company plan offers a 401(k) or 403(a) or (b) that allows for a 55 withdrawal rule. Some plans prohibit withdrawals before age 59 or 62.
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You leave a position (voluntarily or involuntarily) on or after age 55.
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You fully understand that your funds must be placed in the employer's plan prior to withdrawal and that you can only withdraw from your current employer's plan.
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You understand that early withdrawal means forfeiture of any profit that you may have otherwise earned on your investment.
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If you're not working your taxable income should be less when you can wait until the beginning of the next calendar year to begin the 55 withdrawal rule.
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However, as with any financial decision, be sure to check with a trusted advisor or tax professional first to avoid any unforeseen consequences.