QUESTION:

I read somewhere that there is an exception to early withdrawal on a 401(k) account if you are over 55 and retired. Is this true -- and how do I find out more about doing this?

ANSWER:

You read right.

If you retire after age 55 and take a distribution of some or all of your 401(k) plan, the amount you take will be subject to income tax. But not the early distribution tax.

The age 55 rule applies only to qualified employer plans (like 401(k) plans). And because it is a legal rule, there are the mandatory number of flummoxing exceptions to it. For example, if you took a distribution and rolled it over into an IRA first, you are stuck and must wait until you are 59 1/2 -- unless some other exception applies in your specific plan.

And if you retired and left your money in your former employer's 401(k), the terms of the employer plan might preempt the federal rule. For example, the plan might require you to wait until you are a specific age -- 62 or 65 are common cutoffs. Or sometimes the plan gives you an option to take a distribution once a year.

To find out the exact rules that control your roosting, check with your plan administrator.