Moving Your 401(k) to Fidelity, Schwab or Vanguard In Retirement? Watch This First!

About this video

• Video Title: Moving Your 401(k) to Fidelity, Schwab or Vanguard In Retirement? Watch This First!
• Channel: Diamond NestEgg
• Speakers: Not explicitly mentioned, but implied to be a single narrator.
• Duration: 18:53

Overview

This video explains the rules and strategies for withdrawing funds from 401(k) and IRA accounts before the age of 59 and a half without incurring the 10% early withdrawal penalty. It covers the "Rule of 55" for 401(k)s and the "Substantially Equal Periodic Payments" (SEP) or Rule 72T for both 401(k)s and IRAs, detailing the conditions, methods, and risks associated with each.

Key takeaways

• Rule of 55: Allows penalty-free withdrawals from a 401(k) or 403(b) if you separate from your employer in the year you turn 55 or older. This rule does not apply to IRAs or old 401(k)s unless rolled into the current employer's plan.
• Substantially Equal Periodic Payments (SEP)/Rule 72T: An IRS-approved method for taking penalty-free withdrawals from IRAs and 401(k)s (after separating from employer) regardless of age. This involves calculating a fixed annual withdrawal amount for at least 5 years or until age 59.5, whichever is longer.
• SEP Calculation Methods: Three methods exist: fixed amortization, fixed annuitization, and the required minimum distribution (RMD) method. Each has different implications for withdrawal amounts and flexibility.
• Rolling Over to an IRA: Rolling a 401(k) into an IRA negates the Rule of 55, making SEP the primary option for penalty-free withdrawals.
• Considerations for Early Withdrawal: Withdrawals before 59.5 mean forfeiting future compound growth. Roth IRA/401(k) contributions can be withdrawn penalty-free first. Other exceptions for penalty-free withdrawals include qualified education expenses and certain medical expenses.