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Don't Let the IRS Take 20-30% of Your Company Retirement Account When you change jobs or retire, you’ll face one of the most important financial decisions you’ll ever need to make: What do I do with the Lump Sum Distribution from my company’s retirement plan? The amount you've saved in your company's retirement plan could represent the largest asset you own. Your investment may represent years of hard-earned savings – and be a sizable part of your financial support during retirement. If you are eligible to take a distribution from the plan, make sure you know your distribution options and the tax consequences involved before withdrawing money. Consider these numbers when facing a retirement plan distributionIf you have your Lump Sum Distribution directly paid to you, 20 percent must be withheld automatically. Why? Because this payout is considered part of your income now and the 20 percent withholding is credited against federal income taxes you may owe. Note: You may owe additional federal and state income tax on this income, depending upon your tax bracket. In certain situations, you must pay a 10 percent penalty for taking your retirement plan money. You pay this 10 percent in addition to any income taxes you pay on the money. You’re subject to the penalty if you are under the age of 59˝. You can avoid the 10 percent penalty if you open an IRA within the 60 days of your distribution and put the 80 percent you were paid plus 20 percent out of your own pocket to make up for the withholding. The 20 percent withheld counts toward your income tax liability when you file your federal return. You can entirely avoid penalties and withholding and preserve 100 percent of your investment by establishing a Direct Rollover IRA. The key is to have the distribution check deposited directly into your new IRA, so you never even see it. Your savings will continue to grow tax-deferred, and you can withdraw money as you need it. A direct rollover IRA isn’t your only
option… Preserving your retirement savings’ tax-advantaged status with a Direct Rollover IRA couldn’t be easier. Simply call an Annuity Advantage Retirement Plan Specialist at 1-800-239-0356 to discuss all of your options.
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