If you are receiving a distribution from a company-sponsored retirement plan, there are important decisions you need to make— sooner than you may think. How will you preserve the retirement funds you have accumulated to provide for your future? To help you with your decision, here are some common questions about retirement plan distributions. [emember_protected custom_msg=”Click here and register now to read the rest of the article!”]
What is a lump-sum distribution?
It is a payment or payments (occurring within one calendar year) from a pension or profit sharing plan. It represents all contributions made by you or your employer, as well as all earnings.
What is an IRA rollover?
An IRA rollover is a tax-sheltered vehicle for retirement benefits received (a “distribution”) from an employer-sponsored plan. Taxes on all dividends, interest and gains are deferred until withdrawn.
Because the assets in an IRA rollover are untaxed dollars, they compound tax-free and grow more rapidly than money placed in a taxable account.
Is it possible to combine my distribution with another IRA I already have?
Yes. Eligible distributions placed in an IRA rollover retain “portability.” Portability allows you, at any time, to return the amount in your IRA rollover into another employer-sponsored pension or profit sharing plan in which you participate and which provides for such transfers (assuming those plans allow rollovers).
In my next column, I’ll define what type of distribution can be rolled over to an IRA, and more.
As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision.
Raymond James & Associates, Inc., member New York Stock Exchange/SIPC.
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column by BRAD DANTZLER
BIO: Brad Dantzler is a trusted financial advisor with more 18 years of experience. A Winter Haven city commissioner, he is active in his church and community and currently is president of the Winter Haven Library Board. He has been an active President’s Club member for six years.[/emember_protected]
