Mrs. CS and I are doing some retirement planning. If she works until the year she turns 55, and then retires in that year, she can withdraw from her 401k without penalty. For purposes of this thread, I'll call that rule the "Exemption."
As I understand it, the restrictions for using the Exemption are:
1) Retirement must occur in same calendar year as when Mrs. CS turns 55,
2) Can withdraw only from the current employer's 401k (i.e. prior employer's 401k plans are not eligible),
3) Does not apply to any IRA, including an IRA created from a rollover from prior employer's 401k.
Someone please correct me if I am wrong on any of the above.
So, my questions:
1) If Mrs. CS "rolls in" funds to her current 401k, which are funds that are currently in either (a) a prior employer's 401k plan, and/or (b) in a rollover IRA created from a prior employer's 401k, are these funds eligible for the Exemption?
2) If Mrs. CS returns to work at any time prior to age 59.5, does that return to work affect the Exemption in any way? E.g.: (a) can Mrs. C. still withdraw 401k funds while working, (b) are there any restrictions on the return to work, such as under a certain # of hours, or certain $ amount gross income? Could she even return to work and contribute to a 401k?
Note: I am aware of the Roth pipeline and SEPP approaches to access IRA/401k funds before 59.5. I'm just interested in this "retire during 55th birthday year" to see how we can incorporate that into our planning. Mrs. CS says she wants to scale back considerably in a few years, but doesn't think she wants to fully retire -- she works in healthcare, and could continue working on a very part time basis, such as a few days per month, such as to fill in when others are on vacation.