General Blog Cover Photo

Ask a Trust Officer

401(k) Protection Programs

Dear Trust Officer:
When I retire in about a year, I’m expecting a six-figure distribution from my employer’s 401(k) plan. The success of my retirement depends on what I do with this money. What should I do to keep all of my options open?
— Looking Ahead to Financial Independence

Dear Looking:
I have two words for you: IRA Rollover. With this arrangement, you can continue the tax deferral that your 401(k) account has enjoyed so far. Be sure that you use a “trustee-to-trustee” transfer of the funds to avoid the 20% tax withholding that otherwise would apply to your distribution.

Will your distribution include shares of employer stock? If so, you should consider not rolling those shares over, but rather accepting them for your taxable portfolio. Income taxes on “net unrealized appreciation” in those securities may be deferred in this manner. Your accountant should be able to give you more details.

You’ll also need an investment plan for your retirement money. When you undertake this, consider your taxable and tax-deferred funds as part of one large portfolio. The plan that you or your investment advisors come up with needs to take all of your resources into account, as well as your retirement income needs.

Do you have questions concerning wealth management? If so, send them over to Adam Cox, JD, MBA, and he’d be happy to help.

© 2017 M.A. Co. All rights reserved.