New York - Federal guidelines allow plans to offer several options; hence, the specific available to you are dependent on your plan. Here are the allowable options:
- Lump-Sum Distribution - Most plans provide for a lump-sum distribution (you get your entire account balance at one time) or allow you to leave the money in the plan until the April after you turn age 70 1/2. If you are no longer working at that age you will be required to begin receiving minimum required distributions. Please note that if you wait until the year after you turn 70 1/2 to begin your distributions, you will be required to take two distributions in the same year and you would pay additional taxes on the second distribution.
- Periodic Distributions - You may be able to take your money out in periodic distributions during a number of years or based on life expectancies. These distributions will be fully taxable, and, if they extend beyond 10 years, they cannot be rolled to another tax deferred investment, like an individual retirement account (IRA). Some plans will allow you to receive less than 10 annual distributions. If you choose this option, you may roll the taxable portion of each payment to an IRA. In most cases, you cannot change the amount you receive once the distributions have begun.
- Annuity - Still other plans may allow you to purchase an annuity with the proceeds of your account and begin an immediate income flow.
If you receive the balance of your account in the form of a lump-sum distribution, you may roll it directly to an IRA and have total control over your cash flow. If you are between the ages of 59 1/2 and 70 1/2, you may withdraw as much as you want each year. You will pay ordinary income tax but no 10 percent early withdrawal penalty. If you are under age 59 1/2, you may begin early withdrawals without paying the 10 percent penalty if you receive substantially equal, periodic payments (based on life expectancies) for the longer of five years or until age 59 1/2. In other words, if you were 52 the amount that is calculated for you to withdraw would have to be taken each year for at least the next seven and a half years - that is until you are 59 1/2. On the other hand, if you were 58 when you started receiving payments, you would have to continue for five years -- until age 63. If you were 70 1/2 or older, the amount you would withdraw would be calculated for you based on your life expectancy or the joint life expectancies of you and your designated beneficiary.
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