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Module 9d

Retirement and Estate Planning > Planning for a Secure Retirement > Module 9d

Module 9d: Getting Ready to Retire

Al, age 62, has the possibility of a large lump sum distribution from his employer. Because he is retiring and is older than 59 ½, there is no penalty tax associated with the withdrawal.

He plans to roll the money over into an IRA and establish "substantially equal periodic payments" over his life expectancy or over the joint life expectancy of himself and a beneficiary.

A caution:
Al must be careful to roll over the lump sum within 60 days to an IRA. The employer can do a direct rollover from the employer plan to the IRA (Al will not receive the lump sum in the interim.

If Al takes t of the lump sum, the employer must withold 20% from the total for taxes.

If Al takes the lump sum but makes the rollover into the IRA within the 60-day limit, he will eventually receive a refund of the 20% withholding tax.

There are additional regulations that might apply, but these two illustrations should help you decide what to do with a lump sum distribution. Be sure to discuss the proposed distribution with your plan sponsor before making a commitment.

Module 9 - Module 9a | Module 9b | Module 9c | Module 9d