Social Security’s full-benefit retirement age currently stands at 66 years and two months for people born in 1955. For those born in 1960 or later, the retirement age will rise to 67 years.
However, 401(k) withdrawals are available even sooner. Penalty-free distributions from tax-advantaged retirement accounts typically begin at age 59.
In some cases, you can withdraw at age 55. The Motley Fool explains how:
The rule of 55
What the 401(k) has in its favor is the ability to get penalty-free withdrawals as early as age 55. However, there’s a big catch: In order to qualify, you have to leave your job with the employer holding your 401(k) plan account, and you have to wait until the year in which you turn 55 to leave employment.
What that means is that you cannot claim penalty-free withdrawals at age 55 for the following:
- A former employer’s 401(k) where you stopped working for that employer before the year you turned 55.
- Your 401(k) account with your present employer for whom you’re still working.
- Your rollover IRA into which you transferred your 401(k) money after you quit your job, even if you quit at 55 or after.
In each of those situations, the older requirement of age 59 1/2 will apply.
While it’s not common, you may have the option to withdraw sooner. Just consider whether you truly need the money or if you’d be better off watching it grow.