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Don't jump the gun by taking a distribution of your 401(k) money before you look at all your options and make an informed decision. To summarize, you have the following options if you want to roll over your distribution:
IMPORTANT NOTE: See the section Roth IRA Conversions to learn about Roth IRA conversions that may be available to you even if you do not meet the criteria for a Roth IRA.
Distributions over Your Life Expectancy
Another way to avoid the 10% early withdrawal penalty tax on a distribution from a 401(k) plan upon leaving the company is to take the distribution over your life expectancy. You must take a series of substantially equal periodic payments at least once a year over your life expectancy or the joint lives of you and your beneficiary. Of course, you will pay ordinary income tax on the distributions you receive each year. The withdrawal schedule must continue at least five years, and at least until you reach age 59½. This option should only be considered when you really need the money or are close to retirement. Otherwise, you'll be depleting your retirement savings before retirement.
IMPORTANT NOTE: Not all 401(k) plans allow this type of distribution option. Check with your plan administrator.
SUGGESTION: Another way to avoid the 10% penalty tax is to directly roll over your 401(k) distribution to a traditional IRA and then take distributions over your life expectancy. Consider setting up more than one IRA and take distributions from only one of them to keep you from depleting all your retirement savings.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates. Securities and insurance offered through LPL or its affiliates are:
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