Timing for rollover 401K to IRA?

I have lots of money in my 401K from my last employer whom I retired from 2 years ago. I want to transfer these funds into a managed IRA. But I have been told by uninformed sources that I can withdraw from a 401k with no penalty but once I transfer to a ira I cannot do so. I will need sufficient funds middle of next year to purchase my condo (the fee simple option has been offered-only hawaii residents understand this) I become 59 1/2 at the end of the year. so I have been advised that I should keep my funds in the 401k withdraw what i need to make my purchase and then transfer the remaining fund to a managed IRA with a brokerage firm .

Why all the confussion?

Distributions from 401(k)s are NOT subject to the same rules as distributions from IRAs.

ERISA rules allow for penalty free distributions to be made from 401(k)s at age 55 provided you seperated from service with that employer after age 55.

IRAs are subject to the 59.5 age requirement....401(k)s allow for this age 55 exception.

It sounds to me as if your "uniformed" source was quite accurate and "informed." (certainly more so than these other folks that posted answers about pre-59.5 penalties on 401(k) distributions).

Make an appointment with a certified financial planner. That person would have the most current information about tax consequences and penalties for withdrawal.

It was my understanding that a 401k is treated, as to withdrawls, exactly like an IRA.

Check with a tax specialist to get accurate answers.

Not sure if that was supposed to be funny, but "uninformed sources" is absolutely a correct assessment on your part! It makes no difference whether your deffered comp is in an IRA or a 401(k), if you withdraw it before age 59 1/2 you'll pay taxes, penalties & capital gains.

The only way to avoid this is by something called a "substantially equal payment plan" whereby you divide the balance by your life expectancy, and then take regular annual payments of that amount & simply pay the income tax at your current rate.

And rest-assured "fee-simple" is not exclusive to Hawai'i!

You can make withdrawals from a 401k or an IRA without penalty starting January 1st of the year in which you turn 59 and 1/2. Thus, if you were born before June 30, 1947 you could have started taking withdrawls, without penalty, on January 1, 2006.