# 401(k) keeps "growing" even in retirement, right? **URL:** \ **Category:** Factual Questions\ **Created:** [February 14, 2017, 6:24pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836 "2017-02-14T18:24:16Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [February 15, 2017, 10:34pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/21 "2017-02-15T22:34:07Z")
> [@edwardcoast](#): > > Do you actually have a financial advisor by name assigned to you? If not, go with a brokerage house that does. I would advise caution with this approach. The two problems with using a brokerage house for managing your money are: 1) they typically get large management fees, and 2) they are probably not acting as a fiduciary, with your (and only your) best interests in mind. Even if they have a low management fee, they could be making decisions on how to invest your money based on kickbacks from the investment products they use. He mentioned he was subscribing to a standard-sounding plan with Fidelity, which I would trust more than a local brokerage. If you want to use a personal adviser, be sure to use one who will tell you that he’s a fiduciary, and expect to pay him directly (you want a money manager who works for _you_, not for his brokerage). However, for someone in their 20s, the key is to put as much in as you can, to get the full match from your employer, put it in an index fund with low fees, and don’t look at it more than once a year. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [February 16, 2017, 12:57am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/22 "2017-02-16T00:57:36Z")
> [@Mighty\_Mouse](#): > > … > > Here’s the scary and sad thing, even with maxing out at either the maximum plan % (15%/18%/20%) or the statutory maximum (now $18k) I’m nowhere near on track for early retirement. My income has increased about 10X in nominal terms. So the big sacrifices I made to put away 15% of my meager early earnings didn’t really pay off even with 25 years of compounding. > > I guess if I knew I would do as well in my career, I would have lived it up a little more in my 20s! > [@Mighty\_Mouse](#): > > … > Here’s the scary and sad thing, even with maxing out at either the maximum plan % (15%/18%/20%) or the statutory maximum (now $18k) I’m nowhere near on track for early retirement. My income has increased about 10X in nominal terms. So the big sacrifices I made to put away 15% of my meager early earnings didn’t really pay off even with 25 years of compounding. > > I guess if I knew I would do as well in my career, I would have lived it up a little more in my 20s! 1. look at what the picture would be like now if you HADN’T saved that money in your 20s. Maybe not THAT big a deal but if you hadn’t gotten in the habit of saving then, you might not be in the habit now. 2. If you’ve maxed out all the tax-advantaged plans, there’s absolutely no reason not to save money in other vehicles. I don’t think anyone is likely to be able to take early retirement just on their IRA / 401(k) savings. If you assumed the maximum contribution at any given year, with a common matching scheme (e.g. up to 3% of your contributions), and some reasonable growth rate of, say, 6%, I wonder what the max someone could have accrued over the years since IRAs and 401(k)s were created. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 16, 2017, 1:47am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/23 "2017-02-16T01:47:48Z")
What’s the maximum that someone can accrue in an IRA? Well, when Mitt Romney was running for president, we learned that he had over $100 million in his IRA. [This article](https://www.theatlantic.com/politics/archive/2012/09/whats-really-going-on-with-mitt-romneys-102-million-ira/261500/) explains how he might have accomplished this. (In short, by making private equity investments using money in his IRA. But it’s actually not a smart thing to do, because the massive capital gains will be taxed as ordinary income and had he made the private equity investments using a non-tax-deferred account, the capital gains would be taxed at the lower capital gains tax rate.) ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [February 16, 2017, 1:58am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/24 "2017-02-16T01:58:11Z")
> [@Mama\_Zappa](#): > > I don’t think anyone is likely to be able to take early retirement just on their IRA / 401(k) savings. Maybe, depending on how you define “early.” Barring a massive collapse and/or the complete eradication of Social Security/Medicare at their income bracket, I know of at least one person who has plenty of money in their 401K + rollover IRAs for early retirement. Heck, they could retire now (at age 50), except…that’s their only large source of savings, so they’ll have to work until age 59 and a half to get at it. I don’t know if “almost 60” really counts as “early retirement” or not. ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [February 16, 2017, 2:17am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/25 "2017-02-16T02:17:04Z")
> [@Mama\_Zappa](#): > > I don’t think anyone is likely to be able to take early retirement just on their IRA / 401(k) savings. If you assumed the maximum contribution at any given year, with a common matching scheme (e.g. up to 3% of your contributions), and some reasonable growth rate of, say, 6%, I wonder what the max someone could have accrued over the years since IRAs and 401(k)s were created. I’ve been in an a 401k since 1984. Between me and my wife, we’re well into a seven-figure amount just in IRAs and 401ks and Roths. I’m 55 now and looking to retire in two or three years. I wouldn’t be doing it so soon if that’s all we had, but that is enough to retire a little early by itself. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [February 16, 2017, 3:12am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/26 "2017-02-16T03:12:17Z")
> [@Mama\_Zappa](#): > > 1. look at what the picture would be like now if you HADN’T saved that money in your 20s. Maybe not THAT big a deal but if you hadn’t gotten in the habit of saving then, you might not be in the habit now. > > 2. If you’ve maxed out all the tax-advantaged plans, there’s absolutely no reason not to save money in other vehicles. > > I don’t think anyone is likely to be able to take early retirement just on their IRA / 401(k) savings. If you assumed the maximum contribution at any given year, with a common matching scheme (e.g. up to 3% of your contributions), and some reasonable growth rate of, say, 6%, I wonder what the max someone could have accrued over the years since IRAs and 401(k)s were created. 1. Oh, no, no, no. I was joking. I know I did the right thing, and have choices now that I wouldn’t have. 2. About 70% of our assets are in nonretirement accounts. Many years we have saved 40% of our GROSS income (after paying 35% tax). We just never spent most bonuses, stock awards, option windfalls. 3. I think if you have been at the IRS max for 25 years, it just might be possible. The trick of course is to expect a retirement income that is somewhat lower than you had when working. Health insurance until Medicare eligibility used to be the deal breaker. ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [February 16, 2017, 3:26am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/27 "2017-02-16T03:26:17Z")
> [@jasg](#): > > The power of compound interest. I absolutely loathe this phrase for two reasons. 1) Compound interest is not powerful except in the mathematical sense of the word. That word is only used by people trying to sell you investments and never cash them out. To the rest of the world, it’s just “growth.” 2) 401ks don’t earn interest. They earn dividends and they appreciate in value. The phrase makes it seem like compounding is a special characteristic of certain financial vehicles, but in reality, it happens to everything that increases exponentially, including bacteria colonies, political revolutions, and reality cooking shows. > [@Velocity](#): > > Thanks, maybe I should see a financial professional, yeah. Although what I’m doing right now is just having Fidelity manage it - I selected one of their plans, the year-2050 plan (the plan is to retire at 2050) and they apparently diversify my 401(k) among several hundred different investment things, going more aggressive since I’m still in my 20s (if I were older they’d be more risk-averse.) At least that’s how the understanding is…I think I might be able to just sit back for 33 years and let Fidelity manage it…? Please don’t use those plans. They give them a nice, pretty sounding title, and it’s like “Hey, I like retirement! And 2050 sounds like a good year to do it!” But in reality, the Fidelity 2050 (FFFHX) plan has an expense ratio of a whopping .77%! That’s nearly 9 times the cost of a simple FSTMX total market index fund. And what do you get for your money? FFFHX holds mainly FNKLX and FCGSX, who together hold mostly… **JPMORGAN CHASE & CO** CISCO SYSTEMS INC **JOHNSON & JOHNSON** PROCTER & GAMBLE CO CHEVRON CORP NVIDIA CORP **APPLE INC** **[AMAZON.COM](http://AMAZON.COM) INC** ALPHABET INC CL A **FACEBOOK INC A** **GENERAL ELECTRIC CO** FSTMX holds… **APPLE INC** MICROSOFT CORP EXXON MOBIL CORP **JOHNSON & JOHNSON** BERKSHIRE HATHAWAY INC CL B **JPMORGAN CHASE & CO** **[AMAZON.COM](http://AMAZON.COM) INC** **GENERAL ELECTRIC CO** **FACEBOOK INC A** AT&T INC It’s the same damn companies!! That’s why their returns are nearly identical in the short term, but the cheaper one is [almost always better.](https://www.google.com/finance?q=fstmx%2C+fffhx) So yeah, you could just let Fidelity charge you to manage it, or you could just buy an index fund of the entire stock market and have the same thing for a tenth of the cost. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 16, 2017, 4:21am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/28 "2017-02-16T04:21:43Z")
If the fund that **Velocity** ’s 401(k) is invested in is the Fidelity Freedom® 2050 Fund (FFFHX), then, yes, he’s paying a 0.77% expense ratio. But the same thing is available as an “institutional premium class” fund (FFOPX) with an expense ratio of 0.19%. I would hope that the 401(k) custodian has the money in the lower-cost fund. But, yes, in general, many employers pay very little attention to the amount their employees pay in fees for the 401(k) plan, and of course the employees have little choice in where to invest. I think there even have been lawsuits against employers for excessive fees. ---
**Author:** ![nearwildheaven](https://avatars.discourse-cdn.com/v4/letter/n/90db22/32.png) [@nearwildheaven](https://boards.straightdope.com/u/nearwildheaven)\ **Post date:** [February 16, 2017, 5:03am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/29 "2017-02-16T05:03:03Z")
They don’t “mature” the way savings bonds do, if that’s where you’re coming from. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [February 16, 2017, 6:13am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/30 "2017-02-16T06:13:52Z")
> [@jasg](#): > > The power of compound interest. > [@Chessic\_Sense](#): > > I absolutely loathe this phrase for two reasons. 1) Compound interest is not powerful except in the mathematical sense of the word. That word is only used by people trying to sell you investments and never cash them out. To the rest of the world, it’s just “growth.” 2) 401ks don’t earn interest. They earn dividends and they appreciate in value. > > The phrase makes it seem like compounding is a special characteristic of certain financial vehicles, but in reality, it happens to everything that increases exponentially, including bacteria colonies, political revolutions, and reality cooking shows. Ok. The key point is investing early - like the OP - is better than later. Compound interest, growth, dividends, whatever have a powerful effect on successful retirement planning. ---
**Author:** ![Velocity](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/velocity/32/18006_2.png) [@Velocity](https://boards.straightdope.com/u/Velocity)\ **Post date:** [February 16, 2017, 7:47am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/31 "2017-02-16T07:47:31Z")
Thanks **Dewey Finn** and **Chessic Sense** , I wasn’t looking out for that. Not sure if companies like Fidelity would agree to a lower expense ratio than 0.77% (why would they, when they can make the money) or if the only way to get a lower expense ratio is to bail out of Fidelity entirely? ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 16, 2017, 1:08pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/32 "2017-02-16T13:08:06Z")
The institutional premium class funds are available to employee-sponsored plans with more that $100 million invested. It’s cheaper for Fidelity to service one retirement plan account with $100+ million than a much larger number of individual accounts with a much smaller amount in each. ---
**Author:** ![lazybratsche](https://avatars.discourse-cdn.com/v4/letter/l/ba8739/32.png) [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)\ **Post date:** [February 16, 2017, 1:15pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/33 "2017-02-16T13:15:29Z")
> [@Velocity](#): > > Thanks **Dewey Finn** and **Chessic Sense** , I wasn’t looking out for that. Not sure if companies like Fidelity would agree to a lower expense ratio than 0.77% (why would they, when they can make the money) or if the only way to get a lower expense ratio is to bail out of Fidelity entirely? Fidelity does offer low-cost index funds, though you’ll have to see whether they’re available in your 401k. You can use Fidelity index funds to replicate [Vangaurd’s “target date” funds](https://www.bogleheads.org/wiki/Vanguard_target_retirement_funds), which are simply bundles of stock and bond index funds that gradually shift from stocks to bonds over time. You’ll just have to manually change the proportions in each fund once every year or so. If you’re willing to a little more research, check out some “[lazy portfolios](https://www.bogleheads.org/wiki/Lazy_portfolios)”, which are a little more diversified and complicated than a simple stock/bond split. Finally, if you get any kind of matching 401k contribution from your employer, keep using it even if all the available funds have lousy expenses. An instant 100% return from the match can more than make up for decades of 2% fees. ---
**Author:** ![rbroome](https://avatars.discourse-cdn.com/v4/letter/r/838e76/32.png) [@rbroome](https://boards.straightdope.com/u/rbroome)\ **Post date:** [February 16, 2017, 2:09pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/34 "2017-02-16T14:09:58Z")
> [@CurtC](#): > > \ However, for someone in their 20s, the key is to put as much in as you can, to get the full match from your employer, put it in an index fund with low fees, and don’t look at it more than once a year. +1 for truth! I would only add that this advice is relevant to any age. Not that I follow it, but it is good advice. I play around with my investments and the one’s that do best are the index funds that I don’t look at or fiddle with… ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [February 16, 2017, 8:30pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/35 "2017-02-16T20:30:03Z")
> [@lazybratsche](#): > > Fidelity does offer low-cost index funds, though you’ll have to see whether they’re available in your 401k. > > \ > > If you’re willing to a little more research, check out some “[lazy portfolios](https://www.bogleheads.org/wiki/Lazy_portfolios)”, which are a little more diversified and complicated than a simple stock/bond split. For a very, very lazy portfolio, Fidelity offers a low fee - 0.11% - index fund that is actually 4 index funds in one. This fund, [FFNOX](https://fundresearch.fidelity.com/mutual-funds/composition/31634R109) contains an S&P500, Extended market, International market and Bond index funds. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [February 16, 2017, 8:47pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/36 "2017-02-16T20:47:56Z")
> [@TimeWinder](#): > > Maybe, depending on how you define “early.” Barring a massive collapse and/or the complete eradication of Social Security/Medicare at their income bracket, I know of at least one person who has plenty of money in their 401K + rollover IRAs for early retirement. Heck, they could retire now (at age 50), except…that’s their only large source of savings, so they’ll have to work until age 59 and a half to get at it. I don’t know if “almost 60” really counts as “early retirement” or not. They aren’t asking for my advice but people in their situation can withdraw funds in “substantially equal periodic payments” at any age without paying income tax penalties. If they have the money, they can retire now. They have to continue the SEPP withdrawals for at least 5 years and until they turn 59.5, whichever is later. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [February 16, 2017, 9:44pm UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/37 "2017-02-16T21:44:21Z")
> [@Orwell](#): > > jasg mentioned it above, but it’s a bit buried. If anyone is really interested in investing, there is no better resource to learn than [Bogleheads.org - Index page](https://www.bogleheads.org/forum/index.php). There are wiki pages on all sorts of topics, as well as forums to discuss your plans, ideas and situation. Agreed, that’s a good place to monitor discussions and ask questions, though many of the posts here have been good answers too. The community there is a little overboard sometimes rejecting _anything_ that isn’t ‘buy Vanguard mutual funds at some X% stocks and 100-X% bonds according to your risk preference, and stay the course!’. For some people and in some situations the investing world isn’t that simple. However, few are those for whom the downside from hardcore Bogleheadism is very great, while there’s huge downside to naive investors buying into various other schemes that will sound just as reasonable to them. On returns another flaw of the community there IMO is a tendency to excessive optimism about future expected returns. There seems to be a feeling that if one draws pessimistic conclusions about expected return from current high valuations of stocks and bonds, as one would by using straight forward valuation/return metrics, you’re somehow inviting people to try to time ups and downs to do better than that. But there’s really no logical connection between those two things. Now the real return of long term US govt bonds is at most ~1%. The cyclically adjusted P/E of the S&P 500 is around 29, or an earnings yield of 3.45% which should roughly correspond to the real (ie inflation adjusted) expected return. So you might figure 2.5% real expected return (pre-tax\*) for the ‘classic’ 60/40 US stock/US govt bond portfolio, considerably lower than multi-decade historical but valuations on both sides were generally lower than now. There’s room for some debate about that of course, one aspect of which would be foreign stocks where valuations aren’t as extended. But there’s no particular reason future returns would mimic past ones, whereas while the actual future return is unknowable the ‘average’ (loosely speaking) of all future outcomes, which is all ‘expected return’ means, will have some connection to starting valuations, a very clear relationship in case of bonds\*\*. _so assuming you realistically view $100k in a 401k as (1-tax rate)_$100k not really $100k, it’s a tax free return on that discounted amount. \*\*in either case though talking about some fairly long horizon but say within the maturity limit of now existing bonds. Call it say a 10 yr expectation though there’s no explicit time dimension to stock expected return. A 41yr expectation, 29 yrs old to 70 yrs old? That’s just too long for there to be any point debating or worrying about. OTOH ‘what’s going to happen because of Trump’ is also a waste of time, from investing POV IMO, though a valid political topic. ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [February 17, 2017, 2:15am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/38 "2017-02-17T02:15:37Z")
> [@jasg](#): > > Ok. The key point is investing early - like the OP - is better than later. Compound interest, growth, dividends, whatever have a powerful effect on successful retirement planning. Not really. If one guy invests at 25 and another at 26, they have the same amount when one is 70 and the other 71, all other events being equal. You have to either invest more, longer, or at a higher rate. Those are the only things that matter, and any other advice is derived from affecting those three. “Invest early” really means “invest longer.” “Time the market” really means “earn a higher rate.” “Get the employer match” really just means “invest more.” I don’t say this to contradict you, **jasg**. I just want to be clear on how the magician does the trick. > [@Velocity](#): > > Thanks **Dewey Finn** and **Chessic Sense** , I wasn’t looking out for that. Not sure if companies like Fidelity would agree to a lower expense ratio than 0.77% (why would they, when they can make the money) or if the only way to get a lower expense ratio is to bail out of Fidelity entirely? You don’t have to desert Fidelity, you just have to pick the right fund. They have many, and the information is not secret. Just do the research. > [@Corry\_El](#): > > Now the real return of long term US govt bonds is at most ~1%. The cyclically adjusted P/E of the S&P 500 is around 29, or an earnings yield of 3.45% which should roughly correspond to the real (ie inflation adjusted) expected return. I’m also not a fan of using “real” terms. If a $1,000 bank account grows at 1% real, I don’t have $1,010. I have that _plus_ inflation. On the other hand, if you say “but it feels/spends like $1,010,” that’s certainly true, but then you can’t compare it to the original $1,000…you have to compare it to that _minus_ inflation, so like $995, cuz that’s your other option. In short, a dollar under the mattress ages the same as every other dollar. You can bury 2017 dollars, but you’ll dig up 2018 dollars. ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [February 17, 2017, 8:43am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/39 "2017-02-17T08:43:08Z")
> [@Tired\_and\_Cranky](#): > > They aren’t asking for my advice but people in their situation can withdraw funds in “substantially equal periodic payments” at any age without paying income tax penalties. If they have the money, they can retire now. They have to continue the SEPP withdrawals for at least 5 years and until they turn 59.5, whichever is later. Several people have told them that that’s not the case. They can take it at age 55 if they actually “separate from an employer” then, but I can find no indication of an “any age” clause in the IRS docs in a quick search (aside from some exceptions with Roth accounts). If you’ve got a pointer to something that says this is allowed (without the 10% early withdrawal penalty), I’ll pass it on to them. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [February 17, 2017, 9:37am UTC](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836/40 "2017-02-17T09:37:37Z")
> [@TimeWinder](#): > > Several people have told them that that’s not the case. They can take it at age 55 if they actually “separate from an employer” then, but I can find no indication of an “any age” clause in the IRS docs in a quick search (aside from some exceptions with Roth accounts). If you’ve got a pointer to something that says this is allowed (without the 10% early withdrawal penalty), I’ll pass it on to them. First, look at the regulation, IRC section 72(t)(2)(a)(iv): > [@](#): > > (t) 10-percent additional tax on early distributions from qualified retirement plans > > (1) Imposition of additional tax > If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer’s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income. > > (2) Subsection not to apply to certain distributions > Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions: > > (A) In general > Distributions which are— > > [Snip] > > (iv) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary, > **[26 U.S. Code § 72 - Annuities; certain proceeds of endowment and life...](https://www.law.cornell.edu/uscode/text/26/72)** The regulation doesn’t say “at any age” like I did but it imposes no age restriction. Any age is implied. They must also separate from service. It’s one of the limitations of IRC 72(t)(3) but they can separate from service at any time if they are taking SEPPs. Of course, in my humble opinion, separation from your employer’s service is a defining feature of retirement. If you want plain English proof from the IRS that 50-year-olds can take SEPPs without paying early withdrawal penalties, look at the first example in this FAQ about “Bob” who is 50. > **[Substantially equal periodic payments | Internal Revenue Service](https://www.irs.gov/retirement-plans/substantially-equal-periodic-payments)** > > These frequently asked questions and answers provide general information and should not be cited as any type of legal authority. They provide the user with information responsive to general inquiries. Because these answers do not apply to every... The IRC has a separate exception to the early withdrawal penalty for separation from service after age 55 but SEPPs don’t have the same age restriction. Separation from service after 55 has a different limitation: the money can’t come from an individual retirement plan. Whoever advised your friend probably confused these two exceptions. [Previous page](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836.md?page=1) [Next page](https://boards.straightdope.com/t/401-k-keeps-growing-even-in-retirement-right/779836.md?page=3)