Is it the age 55 or the year I turn 55?

The year. The exception applies if you leave the job in or after the calendar year you turn 55, so leaving in January before a December birthday still counts. Leaving the year before does not, and turning 55 later does not change that.

Does the Rule of 55 work for an IRA?

No. It covers only the 401(k) or 403(b) of the employer you leave. IRAs are excluded, so rolling that plan into an IRA ends the exception for the money you move. For an IRA before 59½, the usual route is a 72(t) series.

What about 401(k)s from earlier jobs?

They are not covered: you separated from those employers before the year you turned 55. Only the plan of the job you leave in or after that year qualifies.

Can I work again after using it?

The rule looks at when you left that employer. It sets no condition on working somewhere else afterwards.

Is the age different for police and firefighters?

For qualified public safety employees in a governmental plan the age is 50. Other public safety variations, such as years-of-service tests, are not modelled here.

Rule of 55 calculator

Leave your job in or after the year you turn 55 and that employer's 401(k) can pay you with no 10% penalty. Check whether you qualify, how far the plan gets you, and what the rule is worth.

Leaving in the year you turn 56, you qualify. The 10% you don't owe on what the plan pays before 59½:

$20,000

That is 10% of $200,000 taken over the 4 years to 59½. The plan covers every year, with $200,000 left at 59½. Income tax still applies to every withdrawal.

Years from leaving to 59½: 4; Counting the year you leave and the year you turn 59.
Years the plan covers at $50,000 a year: 8.0; Before tax, with no growth.

Age you turn in the year you leaveThe calendar year matters, not the birthday.401(k) or 403(b) at that jobOnly the plan of the employer you leave.$Yearly withdrawalsWhat you plan to take from the plan each year.$

Public safety employee?In a governmental plan, the age is 50.

NoYes

Income tax on withdrawals, state rules, growth and your plan's own payout options are not modelled. Some plans pay only a lump sum or limit partial withdrawals. Nothing is stored and nothing is sent to us — the address bar carries your figures so you can save or share them.

The year you leave decides it

The test is the calendar year you separate from the employer, not your age on the day. Turn 55 in November, leave in March of that year, and you qualify. Leave in December of the year before, and that plan never qualifies, however long you wait.

So if you are near the line, the leaving date is worth planning around. A few months of extra work can open a whole plan to penalty-free withdrawals for the years to 59½.

What it covers, and what it doesn't

It covers the 401(k) or 403(b) of the employer you leave. It does not cover IRAs, and it does not cover plans from jobs you left earlier. Rolling the plan into an IRA out of habit moves the money out of reach of the rule.

Governmental 457(b) plans are outside the 10% altogether, apart from money rolled in from other kinds of plan, so the Rule of 55 is not needed there.

Check two things with the plan first

The law allows the withdrawals; your plan decides how it pays them. Some plans allow only one lump-sum payout after you leave, which would push a whole balance into one tax year. Ask how partial and repeat withdrawals work before you set a leaving date.

A payout that could be rolled over usually has 20% federal income tax withheld when it is paid to you. That is a prepayment, not the final bill: your tax return settles the difference.

Questions people ask

Is it the age 55 or the year I turn 55?: The year. The exception applies if you leave the job in or after the calendar year you turn 55, so leaving in January before a December birthday still counts. Leaving the year before does not, and turning 55 later does not change that.
Does the Rule of 55 work for an IRA?: No. It covers only the 401(k) or 403(b) of the employer you leave. IRAs are excluded, so rolling that plan into an IRA ends the exception for the money you move. For an IRA before 59½, the usual route is a 72(t) series.
What about 401(k)s from earlier jobs?: They are not covered: you separated from those employers before the year you turned 55. Only the plan of the job you leave in or after that year qualifies.
Can I work again after using it?: The rule looks at when you left that employer. It sets no condition on working somewhere else afterwards.
Is the age different for police and firefighters?: For qualified public safety employees in a governmental plan the age is 50. Other public safety variations, such as years-of-service tests, are not modelled here.

To see every route before 59½ side by side, use the early retirement withdrawal strategy calculator. For money already in an IRA, see the 72(t) calculator.

Sources: Internal Revenue Code §72(t)(1), §72(t)(2)(A)(v), §72(t)(3)(A), §72(t)(9) and §72(t)(10); §4974(c) (which plans the 10% covers); §3405(c) (withholding on eligible rollover distributions).