"Retirement: Understanding the Rule of 55"

The Rule of 55 allows individuals to withdraw funds from their current job's 401(k) or 403(b) plan with no 10% tax penalty if they leave that job in or after the year they turn 55. Qualified public safety workers can start even earlier, at 50. However, employers are not obliged to allow early withdrawals, and if they do, they may require that the entire amount be taken out in one lump-sum withdrawal. This rule applies to current, not former, 401(k) or 403(b) plans. The government does not permit penalty-free withdrawals before 59.5 from plans with a previous employer.