Asset Distribution

As you approach retirement, you look back on all that you have accomplished and think, “I’ve really done well for myself.” You started planning for retirement early and built up a nice nest egg so you can live out your golden years in the lifestyle you want to live.

But did you know that the asset distribution plan you choose can have tax consequences and affect your Social Security benefits? How do you know what the right asset distribution plan is for you? Which plan will allow you to live the lifestyle you have chosen and still provide a legacy for future generations?

Asset distributions can be made in three ways, each of which have their own tax and Social Security implications:

  • A lump-sum distribution
  • A series of periodic distributions
  • A rollover into another qualified plan or IRA

If you opt to have your assets distributed in one lump-sum, the distribution must meet four criteria. First, the distribution must be paid from a qualified plan. The distribution must also be made in a single tax year and must be for the full balance available for distribution from all qualified plans. The distribution must be payable at death, age 59 ½, or at the time you leave the company at which the qualified plan is held.

Periodic distributions can be received either through a series of regular and equal payments, or through a series of irregular or unequal payments. If the distribution is taken through a series of regular and equal payments, the amount of distribution is determined based on a number of factors including marital status, the amount available to be distributed, and life expectancy. Irregular or unequal payments can only be taken if the qualified plan administrator is willing to assume the cost of providing this option; it is not guaranteed that this option will be available.

Rolling your asset over into another qualified plan or into an IRA allows you to postpone paying taxes on your distributions. There are, however, some qualifying factors for rolling over your assets. First, you can only make a tax-free rollover once every 12 months. The funds should be transferred from the old account to the new account within a 60-day period. And, if the assets are in the form of property as opposed to cash, the property must be transferred to the new account.

Each asset distribution plan has benefits and detriments, as well as tax and Social Security implications. Determining which distribution plan is right for you can be a confusing and daunting experience. But the comprehensive team of financial professionals – CPAs, tax attorneys, financial planners, and insurance professionals – at Tax Saving Professionals works together to develop the right distribution plan for you, so you can enjoy your golden years with peace of mind and maximize your wealth for generations to come.


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