Many savers learn the hard way that using a 401(k) to build a retirement nest egg can have a major drawback -- early withdrawal penalties. Generally speaking, withdrawals from a 401(k) are penalized 10% when taken before age 59 1/2.
But thanks to a lesser-known rule, you may be able to take a penalty-free 401(k) withdrawal at a slightly younger age. And that flexibility may come in handy if you end up leaving your job in your mid-50s.
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The rule of 55 allows 401(k) savers to take penalty-free withdrawals under certain circumstances. Specifically, you must leave your job the year you turn 55 or later, and you must only withdraw funds from the 401(k) plan sponsored by the employer you've separated from at 55 or later.
If you follow these rules, you may be able to avoid a penalty for tapping your own savings. But there are some nuances to be aware of.

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