Can You Collect Retirement Benefits After You Quit a Job?

When you save money for your personal retirement through an employer-sponsored retirement plan, this money is invested into mutual funds -- such as a 401k plan -- or some other type of investment -- like a SEP or SIMPLE IRA. When you quit your job, you may want to know whether you can collect retirement benefits from such plans.

Process

In order to claim retirement benefits when you quit your job, you generally must be at least age 59 1/2. However, you may also claim retirement benefits from a 401k plan or an IRA under IRS rule 72(t), which allows you to claim benefits by taking equal and substantial payments from your retirement plan prior to this age. The plan payments must continue for at least five years or until you reach age 59 1/2, whichever is longer.

Significance

You may only claim benefits if you have a plan that you would ordinarily be able to take with you if you left your employer -- usually 401k plans and IRAs. A company pension may be withheld from you until you reach age 59 1/2. Your employer maintains the plan until your retirement.

Benefit

The benefit of collecting retirement benefits after you quit your job is that you may be able to retire early under IRS rule 72(t). If you are under the age of 59 1/2 and you use 72(t), you can still access your benefits through regular monthly payments without having to pay a 10 percent early withdrawal penalty. This means you receive more income than you would without using 72(t), and you get to retire earlier than you ordinarily would have been able to.

Disadvantage

The disadvantage to collecting retirement benefits after you quit your job is that your benefits may not last as long. If you are retiring early, you'll need to figure out how to make your retirement savings last for a longer period of time than if you had continued working until your normal retirement age of 59 1/2. Additionally, some retirement benefits -- like pensions -- may not be payable before this age. In this case, you'll need to continue working at another job until you can collect your retirement benefits.