You’ve worked hard to build a comfortable retirement. Don’t let your efforts and good intentions go to waste! When it is time to retire, you can collect on Social Security and 401(k)—but timing is everything. Consider the following:
Age 59 ½ is the magic number for 401K’s
401(k) plans are designed to provide retirement income, so Uncle Sam monitors when you can tap your stash. There is a 10% early-withdrawal penalty in addition to the income tax payable on amounts you withdraw prior to age 59 1/2. If you wait until age 59 ½, there is no early-withdrawal penalty. Keep in mind that you will still have to pay income taxes on your withdrawals.
You might be able to tap your 401(k) at age 55 with no penalty
If you permanently leave you job at age 55 you can generally withdraw money from your 401K without being subject to the 10% penalty tax. This is called the “separated from service” exception.
Special circumstances allow for early 401(k) withdrawal with no penalty
There are situations that will allow you to take money from your 401(k) prior to age 59 ½ without the 10% penalty. For example, if you become totally disabled or are in debt for medical expenses exceeding 7.5% of your adjusted gross income.
When you can receive Social Security Benefits
62 is the earliest age for receiving regular Social Security benefits, but the benefit will be permanently reduced.
Your date of birth determines when you can get your full Social Security retirement benefit. It will be age 65, 66 or 67.