A Publication of WTVP

Are you changing jobs or retiring in the next several months? If you’re like many working individuals, you may be covered by your employer’s 401(k) plan or other retirement plan. When you leave your job, you may have to make an important decision regarding any distribution you may receive from your employer’s plan. As you’ll see, the decision is complex, and there are many factors to consider, based upon your personal circumstances. Generally, you have two choices: deferring taxes by establishing an IRA rollover account or taking the distribution and paying taxes on it.

You may not apply this special tax treatment to employer securities if you roll them over to an IRA. When distributed later from an IRA, all securities are taxed as ordinary income at fair market value as of the distribution date. Also, the distribution that includes employer securities must qualify as a lump sum under federal tax law.

As you can see, the decisions you make regarding the treatment of your retirement plan distribution have a significant impact on your current income tax, as well as your funds available for investment.

Be sure to consult your tax advisor to determine which choice is appropriate for your individual situation before making any tax-related investment decisions. IBI