The Rule of 55 lets people who leave their job at age 55 or older — age 50 for public safety officers — take penalty-free withdrawals from that company’s 401(k). This exception applies only to the specific 401(k) at the job you left at age 55 or older, not to IRAs or prior companies’ plans. (Rolling the balance into an IRA forfeits this benefit entirely.) You still owe ordinary income tax on withdrawals, but the 10% early withdrawal penalty is waived. If you’re considering early retirement, a wealth advisor can help you coordinate this rule with other income sources.
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