Many employees and executives have built up significant assets in company retirement plans and IRAs. As they get closer to retirement, accessing these assets will become very important in their plans. Understanding what choices you have in the distribution of these assets and how to avoid unnecessary taxation will be very important for your future retirement. Both 401k plans and IRAs grow tax deferred. When income is taken out of these plans in retirement, the distribution is 100% taxable.

An important financial decision a person makes before retiring is determining whether or not to rollover their company 401k plan. Some people who have built up significant assets in their 401k plan and are under age 59½ think they can’t retire before that age, because of the 10% IRS tax penalty. There is an IRS tax law 72(t)(4)(A)* that may possibly allow some people with retirement assets in 401k, IRA, 403b, and 457 plans the opportunity to receive retirement income from their assets before age 59 1/2, while avoiding the 10% tax penalty. If the 401K plan is not property rolled to your personal IRA, you may incur an additional 20% withholding from 401k assets. Consulting with a tax professional can help you to avoid these costly tax mistakes.