NMFN: ATN, Northwestern Mutual Investment Services LLC, Distribution Choices When Changing Jobs

For Assets in Your Retirement Plan When Changing Jobs

A career change is not that uncommon. Along with the decision that surrounds your career move, you will have one to make about the assets you have accumulated in your company's retirement plan. There are four basic options available for that distribution:

IRA Rollover

Allows you to move 100% of your assets into a new individual retirement account.
Incurs no penalties or taxes.
Allows your assets to continue to grow tax-deferred.
Generally offers a wider variety of investment options than most company-sponsored plans. Allows you to take the balance of your assets in cash, less applicable taxes and penalties.

Cash Distribution

Allows you to take the balance of your assets in cash, less applicable taxes and penalties. Results in a mandatory 20% tax withholding by the employer and the payment of individual income taxes. May incur penalties if taken before age 59 1/2.*
Forfeits the continued tax-deferred growth of your assets in a retirement plan.
May forfeit your ability to move the distribution into a qualified plan or IRA after 60 days.

Stay in Your Current Plan

Eligibility depends upon your employer and usually requires $5,000 or more in existing assets.
Incurs no penalties or taxes.
Helps your assets continue to grow tax-deferred.
Limits your flexibility in investment options to what is available from your employer.

Roll Over to Another Plan

Eligibility depends upon your employer. Not all employer-sponsored plans accept rollover contributions from a previous employer.
Incurs no penalties, taxes or mandatory withholding.
Helps you continue to save for retirement in a tax-deferred account.
Limits your flexibility in investment options to what is available from your employer.

Taking Withdrawals and Receiving Distributions from a Rolled Over IRA
Withdrawals are governed by various rules that regulate the timing and amount of the withdrawal.

Distributions from an IRA Rollover must begin by April 1 of the year following the year the individual reaches age 70 1/2. Distributions are subject to ordinary income tax and if taken before age 59 1/2 incur a 10% penalty. The penalty is not assessed in special situations and for certain qualified expenses.