I am seeing it in multiple posts? 59yo, 12 years with the company and I just got laid off. Good luck all
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A lot of good advice on this thread for those entering retirement in the next few years. Spend a little time familiarizing yourself with the current tax laws in your country and strategies on how best to leverage them.
In today's world it's not enough to be a 401K millionaire. It's critical to understand how to move that money out of your retirement accounts and into the tax free (Roth) and taxable (brokerage) accounts. Right now if it's in a standard 401K it's Tax Deferred. And like the name implies, you are deferring paying taxes until a later day. Find out how to do so using whatever strategy works best for your financial situation.
I am not a Tax attorney or CPA. Just another laid off ex Dell employee.
Let this be a lesson to everyone. Start understanding your retirement now, build your income plans, understand how RMDs work and how that will impact you and your projected portfolio and taxes. Learn how to leverage Roth and backdoors now to save yourself more money for investing. Know what is tax deferred and what will be tax free.
Here is the specific section of the doc:
Participant Distribution Notice
Plan Name: Dell Inc. 401(k) Plan
Plan Number: 09037
The Plan administrator or the payor can tell you what portion of a payment is eligible for rollover.
If I don’t do a rollover, will I have to pay the 10% additional income tax on early distributions?
If you are under age 59½, you will have to pay the 10% additional income tax on early distributions for any payment from
the Plan (including amounts withheld for income tax) that you do not roll over, unless one of the exceptions listed below
applies. This tax applies to the part of the distribution that you must include in income and is in addition to the regular
income tax on the payment not rolled over.
The 10% additional income tax does not apply to the following payments from the Plan:
• Payments made after you separate from service if you will be at least age 55 in the year of the separation;
• Payments from a pension, profit sharing, 403(b) or 401(k) plan after you attain age 59½;
ok, i'll document... if you were recently let go from Dell and you're at least 55 years old (but not yet 59.5), you may be able to tap into your 401(k) without paying the 10% early withdrawal penalty.this is based on the irs Rule of 55, which allows penalty-free withdrawals if you separate from your employer during or after the year you turn 55.
The key thing is not to roll your Dell 401k into an ira... Once you move it out of the Dell/Fidelity plan, you lose access to this rule. u will find messages here that other posted that leaving the 401k where it is (with Fidelity under the Dell plan) lets you make partial or full withdrawals without the early penalty... taxes will still apply, of course, but that 10% hit goes away...
fidelity’s site says this if you try to model a withdrawal. once folks were off Dell’s payroll, the system no longer applied the penalty, there are messages on this too.... This isn't some obscure loophole either it’s just a legit IRS rule that a lot of financial advisors surprisingly don’t bring up
it’s a good idea to call Fidelity and ask them to walk you through it. Just make sure you’re talking specifically about the Rule of 55 and not the usual 59.5 rules, which is where some reps can get confused....
See the rule here in irs' site:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions
Scroll down to the section titled "Separation from Service."
fidelity also has a helpful explainer here:
https://www.fidelity.com/learning-center/personal-finance/what-is-rule-of-55
Even if you're not turning 55 in the calendar year you're laid off you can still access 401k penalty free using 72(t) SEPP withdrawals (taxed as income). Google that as well while you're researching.
asking questions like this is the whole point of this site, btw, if we explain it here it will show up in google searches too - so there is some value in actually providing information. the more we document the more help people may get. my two cents...
@OP and 6 months after your 55th you can take from Roth at no penalty
@a2 I am the OP. Thanks for the advice, and yes, I can Google too. But, I was trying to put this into our current context.
This is probably the best search on the topic:
https://www.google.com/search?q=DELL+RULE+55+site:thelayoff.com
But I wanted to hear what people who are currently here, and especially those currently affected by the layoffs, think...
Always helpful to search and process the results yourself. Here's MY search result:The Rule of 55 allows individuals to withdraw funds from their 401(k) or 403(b) plans without incurring a 10% early withdrawal penalty if they leave their job in or after the year they turn 55. However, any distributions will still be subject to regular income tax.
To me, this means as someone over 55 years of age you can withdraw from your Dell 401K with a 10% early withdrawal penalty but will incur normal taxes. It's pre tax money so you're going to owe on it.
My suggestion is to use the 50K+ severance you received and try and make that work until you find a new job. That's what I've been doing.
https://www.google.com/search?q=Rule+of+55&rlz=1C1GCEA_enUS1151US1151&sourceid=chrome&ie=UTF-8
I am not aware of a Rule of 55 at Dell. You have your 401k and that is it.
12y with a "tech" company and you still don't know how to solve for this.