As a 56-year-old who will be quitting my current job soon, can I take withdrawals from my 401(k) as needed? Or do I have to take even distributions over a period of time?

I am 56 years old, and I am going to be quitting my current job and going into business for myself. I have a 401(k) plan with my current job, and I know I qualify for the ‘55 rule’ concerning distributions. My employer allows for multiple distributions, but my plan is to take withdrawals as needed. Is this possible, or do I have to do even distributions over a period of time? If that is the case, can I just cash it out completely?

The questions relate to IRS Code Section 72(t)(2)(A)(v) and a participant's ability to take penalty free withdrawals from their employer's 401(k) or other qualified retirement plan if they become separated from service during or after the calendar year they reach age 55 (or age 50 for public safety employees). According to this provision, yes, you can take withdrawals as needed. This exception is unlike other provisions of Section 72(t) where you are required to take a series of substantial equal payments. You are correct that, regardless of IRS code, your particular qualified plan provisions and 401(k) administrator must allow for such distributions. Many plans focus only on the accumulation of assets and aren't set up to help you on the distribution end of things. However, it sounds like you have done your homework. Good luck on your new venture. 

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Answered by: Tami Noll Russo, CPA, is a certified financial planner with Noll Financial Services in Middletown, Pa.