This document discusses options for receiving lump-sum distributions from retirement plans and important tax considerations. The main options are: 1. Directly rolling over the full distribution to an IRA or new employer's plan to avoid taxes and penalties. 2. Establishing a conduit IRA if there is a waiting period to join a new employer's plan. 3. Keeping funds in the old employer's plan if the account balance is over $5,000. Taking distributions as periodic payments or in company stock can allow withdrawing funds before age 59.5 but special rules apply. It is important to consider taxes, mandatory 20% withholding, and 10% early withdrawal penalties when choosing a distribution option.

1. FOR YOUR INFORMATION
Lump-Sum Distributions from Retirement Plans
Watch out for taxes and penalties when weighing lump-sum distribution options.
If you are retiring or changing careers, don’t forget about the funds in your 401(k) or other type of
employer-sponsored qualified retirement plan. Your decision on how to receive your qualified plan
distribution can affect how long your savings will last.
Quick Fact: There are a number of options available. Unfortunately, your distribution could be subject to a vari-
ety of taxes and penalties. Here’s a brief explanation of steps to keep in mind.
Only 18% of workers
are “very confident”
they’ll have enough 1. Direct Rollover
money to live
One way to avoid the 20% mandatory withholding tax (see sidebar), as well as current income
comfortably in taxes, is to directly roll your entire distribution into another qualified employer plan that accepts
retirement. - Survey rollovers or a traditional or Roth Individual Retirement Account (Roth IRA).
by Employee Benefit
Research Institute An IRA is a tax-deferred account that can provide retirement benefits distributed from an employer-
and Mathew qualified plan. Since all earnings continue to accumulate tax-deferred, your money will compound
Greenwald & and accumulate more rapidly than money placed in an otherwise identical taxable account.
Associates, Inc. Investments in an IRA can include stocks, bonds, money-market funds, government securities, unit
2008. investment trusts, and mutual funds. If you have already received your lump-sum distribution,
minus the 20% withholding tax, all may not be lost.
• You have 60 days from the date you received your payout to invest these funds into an IRA or
qualified plan, along with an additional 20% of your own money to cover the amount withheld.
• When you file your income tax return, you will receive credit for the 20% withheld.
• If you fail to act, your entire payout will be subject to state and federal income taxes, and its tax-
deferred status will be lost forever.
To establish a direct rollover IRA or roll over your distribution to a new employer’s qualified plan,
ask your former employer’s plan administrator in writing to transfer the funds to the trustee of the
new qualified plan or IRA. The plan administrator must enable you to make a direct rollover.
2. Establish a Conduit IRA
If there’s a waiting period for participating in your new employer’s plan and you do not want to
leave funds with your former employer, ask your former employer to transfer your retirement ac-
count to a conduit IRA:
• A conduit IRA is designed specifically for temporary rollovers, to keep them separate from any
other IRA funds you possess.
• You may roll over taxable distributions from an IRA into another employer’s qualified plan, even
if the amounts in the IRA include your qualified plan distribution and regular IRA assets or contri-
butions.
• If you commingle your qualified plan distribution with regular IRA assets or contributions, you
will lose any special averaging or capital gain treatment that may otherwise have been available
for the qualified plan money.
You should contact the plan administrator of your new employer’s plan regarding the plan’s
rollover requirements before transferring your retirement account to an IRA. Some qualified plans
may only accept rollovers from conduit IRAs.

2. 3. Keep Funds in Your Old Employer’s Plan
If your account value is at least $5,000, you may keep funds in your employer’s plan until you
reach the plan’s retirement age or age 62, whichever is later, if that’s an option. Your funds will ac-
cumulate tax-deferred and can later move to a new employer’s qualified plan or an IRA without
penalty. If you’re over the plan’s retirement age or age 62, your company may insist you take a pay-
out to decrease the plan’s administrative costs -- but you may still make a direct rollover to an IRA.
4. Periodic Withdrawals
This option may be suitable if you need funds to supplement your retirement income. The 20%
withholding rules do not apply if a distribution is part of a series of substantially equal periodic
payments that are made at least once a year and will last for:
• Your lifetime, or
• Your lifetime and your beneficiary’s lifetime, or
• A period of 10 years or more
The funds you receive will be subject to income taxes. If you choose the “10 years or more” pay-
ment option and you are under age 59½ , you may be hit with a 10% early withdrawal penalty un-
less the distributions fall within the exception for “substantially equal periodic payments.” If you are
receiving fewer than 10 annual payments, 20% of what you expected in a given year (and in future
years) will be withheld. To avoid this, ask your plan administrator to transfer the payments directly
into an IRA. You can then establish a payout schedule to avoid the mandatory withholding tax.
5. Lump Sum in Company Stock
Some plans may allow you to take your lump-sum distribution in company stock. If your distribu-
tion consists solely of such stock, the mandatory 20% withholding tax will not apply. However,
you’ll need to pay regular income tax, and may be subject to the 10% early withdrawal penalty if
you are under age 59½. One way to avoid this pitfall is to ask the plan trustee to sell the stock and
put the proceeds into an IRA within 60 days from the time you receive your lump-sum distribution.
Don’t Lose Out—Get the Facts
Take your distribution in one lump sum and you’ll have immediate, unrestricted use of your money.
But depending on your age and the size of your distribution, you may incur a number of taxes and
penalties. Ask your NYLIFE Securities Registered Representative how New York Life and its affili-
ates’ financial products can help fund your alternative to a lump-sum distribution.
Tax Concerns
Here are some potential tax problems that could occur when you receive a lump-sum distribution:
• State and federal income taxes. When contributed to your 401(k), you likely did so with pre-tax
dollars. Employer contributions to a qualified plan on your behalf were also tax deferred. Upon
distribution, you must pay taxes on pre-tax contributions and earnings.
• Mandatory 20% federal income withholding tax. If you elect to receive a check directly from your
employer, you will only receive 80% of your distribution.
• 10% early withdrawal tax. This penalty may be imposed on the entire distribution if you are under
age 591⁄2, unless the withdrawal is due to death or disability or taken in substantially equal periodic
payments. Certain other exceptions may apply.
This article is for informational purposes only. New York Life Insurance Company does not offer legal, tax, or accounting advice. Please consult with your tax
and legal advisors before taking a distribution from your retirement plan. Securities offered through NYLIFE Securities LLC, Member FINRA/SIPC, a Licensed
Insurance Company.
New York Life Insurance Company
New York Life Insurance and Annuity Corporation (A Delaware Corporation)
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