Understanding your Distribution Options 

Stay Invested

When you leave your employer, you have several choices to make with your retirement plan. You can take a cash distribution of your retirement savings. But if you do so, you will generally have to pay taxes on the distribution and a possible 10% premature distribution penalty tax if the distribution is taken before you turn 59½, or leave your current employer prior to turning age 55.

The contributions in your retirement plan have been protected from current taxes and the earnings have been tax-deferred. Or, if you have made Roth type deferrals you have paid income tax on the contributions. However, qualifying Roth distributions are tax-free. One of the best things you can do is protect your plan’s tax status and let it continue to grow for your future financial security.

If you decide to keep your money working in a tax-advantaged account for your retirement, there are generally three ways to do so. You can:

• Keep your investments in your former employer’s plan;
• Roll your investments into to a new employer’s plan; or
• Roll your investments into an IRA.

Each choice has potential benefits, as well as issues you’ll need to consider before making any decisions.