Participants who are vested in 401(k) plans can begin to access their savings without withdrawal penalties at various ages, depending on the plan and on their own circumstances. If the participant who separates from service is age 55 or more during the year of separation, the participant can draw any amount from the 401(k) without any calculated minimums and without any 5-year rules.

Depending on the plan, a participant may be able to draw funds without penalty at or after age 59 1/2 regardless of whether he or she has separated from service (i.e., the participant might still be working; check with the plan administrator to be sure).

The minimum withdrawal rules for a participant who has separated from service kick in at age 70 1/2. Being able to draw any amount and for any length of time without penalty starting at age 55 (provided the person has separated from service) is one of the least understood differences between 401ks and IRAs.

But he should double check with his 401k provider before making any decisions

When your father retires, he can (and should) roll over his 401(k) to a self-directed IRA. Then he is no longer bound by the 401(k)'s rules and limitations. Since he is over 59 1/2 years of age, there is no penalty for withdrawl from either the 401(k) or the IRA.

Rolling the 401K into an IRA after he retires is the smart thing to do. He won't be subject to the early withholding penalty but he will have to pay income taxes on the funds as he withdraws them. He should only withdraw the funds he needs. That way the rest will continue to earn money and he won't be paying higher bracket tax rates.