What to Do with 401(k) Distribution

Monday, April 18 at 10:20 AM
Category: Personal Finance

You’ve been waiting your whole life for retirement. Now that it’s fast approaching you may be realizing it’s not all about golfing and visiting grandkids. You need to figure out the financial logistics first. The success of your retirement turns on what you do with the large distribution from your employer’s 401(k). This can be an unsettling prospect. What should you do to keep all your options open? 

An IRA rollover is often a good way to use this distribution. With this arrangement you can continue the tax deferral that your 401(k) account has enjoyed so far. Be sure you use a “trustee-to-trustee” transfer of the funds to avoid the 20 percent tax withholding that otherwise would apply to your distribution. 
 
Will your distribution include shares of stock in your employer? If so, you should consider not rolling those shares over, but accepting them for your taxable portfolio. Income taxes on “net unrealized appreciation” in those securities may be deferred in this manner — your accountant can give you more details. 
 
You’ll also need an investment plan for your retirement money. When you undertake this plan, consider your taxable and tax-deferred funds as part of one large portfolio. The plan that you or your investment advisors come up with needs to take all of your resources into account, as well as your retirement income needs. You are wise to be looking into these questions before you retire. 
 
If you have additional questions, feel free to contact your local Client Advisor.
 
(February 2016) © 2016 M.A. Co. All rights reserved.

Tags: Financial Education, Retirement
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