Rule 55

[alucas91607]

Hello,

I was laid off from my job in 2020 when I was 54. I have not contributed to my previous employer's 401k since. Would rule 55 apply to me if I took a distribution in 2023 after being laid off a second time from a different employer?

Thanks,

[DMarkM1]

Yes, the "Rule of 55" as an exception to the 10% early withdrawal penalty would apply to any distribution that happened after you reached age 55 from a qualified plan with a former employer.  Here is an IRS topic with more information.   The distribution is taxable income.  

[dmertz]

Being laid off by a different employer does not qualify you to use the age-55 exception for distributions from the 401(k) at the first employer.

[alucas91607]

Thanks for the reply dmertz.

[alucas91607]

Thanks for the reply DMarkM1