@Hw7OmWF-2hox - Thanks for that correction. However, It's best to leave that pre-tax money in there, if you can, in my humble opinion. Go as long as you can with savings,severance, etc.. Let that stuff grow.
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@euw -- not quite correct, as long as you turn 55 in the same calendar year that you were separated you can avoid the 10% penalty. So anyone laid off recently (this year) can avoid the penalty as long as they turn 55 before December 31st of this year.
Not only do you have to be 55 years of age or older, you can only do that with your last company 401k and only if you are over 55 WHEN you retired or were laid off. A way around that is to have your old 401k rolled over into your current one before you take the distribution(s). If you were a day younger than 55 when laid off/retired, it won't apply. You cannot wait until you reach 55, then try to do it later.
Yes, @aut, that is correct. The caveat is the former employee had to be 55 years of age at separation from the company, to be exempted from the 10% IRS early retirement penalty. I failed to mention that in my post. Thanks for mentioning.
@gej - I believe you have to be 55 years old in the year you were laid off to avoid the penalty. Not everyone can just take it out and avoid the penalty.
@hzs, thanks for your comment, but I'd appreciate you don't make clarifications on my behalf. That said, my post is accurate in that a withdrawal from the Vanguard ESIP 401k prior to age 59.5 is penalty-free and there is absolutely nothing else you need to do prior to making the withdrawal. Vanguard is already well aware of the former Chevron employee's status. There's no paperwork to complete. I know this because I took a one-time withdrawal from my ESIP 401k after being laid off to combine with my severance pay in order to pay off my home. Vanguard took care of the paperwork and advised me they would withhold 20% Federal taxes and acknowledged there would be no 10% IRS early retirement penalty. All they needed was my bank's ABA routing number and the account number. The money was direct deposited in 48 hours. So, just to conclude, my post was directed at laid off Chevron employees who are under 59.5 years old.
Just to clarify the previous poster's comment. Making penalty-free withdrawals from a 401K before you are 59.5 years old is not automatic. There are certain criteria you must meet, depending on the situation. See http://www.schwab.com/public/schwab/nn/articles/Thinking-of-Taking-an-Early-401-k-Withdrawal-Think-Again, for example, for an explanation. But he is correct that there are more options than with a rollover IRA.
You have 2 choices, to take an annuity or a lump sum payment. I decided to take the annuity because it benefited me. It may not be the choice everyone should make. If your choice is to take the lump sum, you will do best with a direct rollover to the Chevron ESIP 401k or a separate IRA. Do not take a cash payment. A direct rollover will protect your lump sum from taxes. You will be able to make withdrawals at a pace you want. You will pay taxes only on the amount taken out. If you are under 59.5 years old, a direct rollover to the Chevron ESIP 401k at Vanguard will be a smart move because your withdrawals won't be subject to the 10% IRS "early retirement" penalty. If you did a direct rollover to an IRA, you would be penalized unless you started withdrawals at or after age 59.5.
The pension money that chevron collects for you every month after you are vested.
What pension?