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Retirement Planning/Lump Sum Distribution from Non Qual

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Question
Hi,

I was asked to retire this June 30, with severance paid for the rest of 2014.  I have about $ 175K in my Non Qual plan and because I am under 65 I am told I need to take it as a lump sum.  I am told that it must be paid out within 60 days of the qualifying event, and the qualifying event is my last day worked, June 30.

This will create a big tax liability for 2014.  Is there any way around this?

Answer
Hi Paula,

Unfortunately, if your plan rules dictate that you must take a lump sum distribution at this point than you have no choice. One of the drawbacks of the Non Qualified plan is that it cannot be rolled over to an IRA to keep it's tax deferred status. One thing you could do is to maximize all of your qualified plan contributions for the year. If you are eligible for an IRA, you could contribute $6500 for yourself and the same amount for your husband, if he is over 50. If you have a 401k still available you could max that out as well. The contribution limit for 401k is $17,500. I am not a tax advisor so I would recommend that you speak with a good CPA about other possible strategies that might help you lessen the tax bill. Sorry I couldn't give you a "magical" answer to your situation. Best of luck!

Dave

Retirement Planning

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David M Iannopollo

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I am a professional financial advisor who can assist you with answers on mutual funds, annuities, IRA's, rollovers, qualified and non-qualified retirement plans, retirement planning, educational planning, life, disability and LTC insurances. I can also show you how to take advantage of the stock market gains without the risk of loss!

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I have over 25 years experience in the business and financial world.

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