What tax form will I receive if I receive distributions?

I began receiving required minimum distributions from my company’s retirement plan. Can I roll over these amounts into my IRA?

Can't I just have a check made out to me for the amount of my retirement, and then deposit it in a rollover IRA within 60 days?

Technically, you can have the retirement plan send a check made payable to you directly, and still have up to 60 days to deposit the money in a rollover IRA. However if you do so, your retirement distribution will be subject to a mandatory 20% withholding tax. If you then wanted the 20% withholding refunded, you would be responsible for claiming the amount witheld when you file your annual tax return, and the IRS would deterime if a refund amount was due.

Instead, if you leave your job and decide that you don't want to leave your retirement plan there, you may prefer to to have the proceeds of your retirement account directly rolled over into Individual Retirement Account (IRA). This avoids the 20% mandatory withholding. [Top]

If I withdraw funds from my retirement early, will I have to pay a penalty tax?

The Internal Revenue Service levies a penalty on people who withdraw money from their retirement plan before they reach a certain age. As a general rule, you'll be assessed a 10% penalty on any withdrawals you make from a retirement plan before you have reached age 59 1/2. You will also have to pay taxes on the money you take out, just as you would if you waited until after you turned 59 1/2. In rare cases, the IRS will waive the 10% penalty on early withdrawals. For example, you can avoid the penalty if you are disabled, or if you need money for medical expenses that are greater than 7.5% of your adjusted gross income. You can also avoid the penalty if you are at least 55 years old when you separate from service. [Top]

If I change jobs, can I leave my money invested in my current employer's retirement plan until I retire?

If you have a retirement plan with your current employer but eventually change jobs, you may be able to leave your retirement with your old employer until you retire. Your ability to do so will be based on the size of your vested account balance. If you have more than $5,000 in the plan and you're under age of the plan's designated retirement age, you have the legal right to leave it where it is. But if your vested balance is less than $5,000, your employer has the right to pay it to you whether you wish to receive it or not. You may choose how to take that distribution, however. It can be made directly to you, to another employer's retirement plan or to a rollover IRA. [Top]

How do I qualify for a hardship withdrawal from my retirement?

Your eligibility for a hardship withdrawal from your retirement plan depends on the plan's rules. You'll have to provide relevant information showing your financial need -- an eviction notice, a contract to buy a primary residence, unreimbursed medical bills, a college tuition bill, or funeral expenses.

Hardships may be requested if allowed by your plan if you have taken all permissible loans from the plan and you make no plan contributions for the next 6 months. You may be limited on your contributions in the year after that, and you may withdraw only as much as you need to cover the immediate emergency.

Remember: Even if you qualify for a hardship withdrawal from your retirement, you will still have to pay a 10% penalty in addition to the normal federal, state and local income taxes. [Top]

What is meant by a premature distribution from a retirement plan?

When you withdraw money from a retirement plan earlier than the age required by the Internal Revenue Service (59 1/2), the money you receive is known as a premature distribution and is subject to a 10% penalty unless you qualify for an exception to the penalty. [Top]

What tax form will I receive if I receive distributions?

If you receive a distribution from a retirement plan the company that makes the payment will send you a Form 1099-R. [Top]

I began receiving required minimum distributions from my company’s retirement plan. Can I roll over these amounts into my IRA?

No. Rollovers to IRAs of required minimum distributions (RMDs) from a retirement plan are not permitted. This is true whether the RMD is made because you turned age 70 ½. If you receive your entire account balance in a lump sum, any portion that is an RMD cannot be rolled over, but the remainder can be. For example, if you are retired from the company holding your retirement plan and turned 70 ½ this year, part of any lump sum received this year cannot be rolled over because the lump sum will include your first year’s RMD, even though your first year’s RMD can be put off until April 1 next year. [Top]