If you are nearing your retirement date (or if you have recently retired) and hold assets in a 401(k) or other qualified employee pension plan, you have some crucial decisions to make about how you take possession of those funds. The funds held in these plans are called qualified money, meaning it is qualified for special tax-deferred status by the federal government. Funds withdrawn from a retirement account at any time are termed a distribution. If you take a lump sum distribution, you are withdrawing the entire balance, regardless of its size.

The experts at America's IRA Centers™ will gladly explain the tax implications of taking 401(k) proceeds as a lump sum distribution. They will explain that laws governing traditional IRAs allow you to roll those funds into an IRA tax-free. However, the custodian of a 401(k) (i.e., your previous employer) will not automatically perform that service for you. The tax codes provide for a 60-day window during which you can remove qualified money from your pension or 401(k) and deposit it in a traditional IRA or a Roth IRA.

But be advised: The IRS does not trust that you will dutifully meet your 60-day obligation. If you request the lump sum distribution by check, the employer is required to withhold 20 percent for federal income tax. Thus, on a $50,000 lump sum distribution, you would pay $10,000 in withholding to the federal government. America's IRA Centers™ can explain how you may avoid the 20 percent withholding requirement via a trustee-to-trustee transfer.

Also be advised: There are severe tax consequences if you fail to roll the funds over within the 60-day period. If you miss the deadline, the withdrawal becomes taxable. Also, a rollover can be undermined if you violate the same property rule. The tax code does not allow you to deposit the funds in a new form-that is, if you use the distribution to make other investments, buy other securities or assets. For instance, if you were to use your rollover check to buy 100 shares of stock, the government will not permit you to redeposit the stock in your IRA as a rollover. That transaction would be disallowed, and your entire IRA would come taxable, or "tax-infested." The safe money experts at America's IRA Centers™ can explain the same property rule, and help you avoid this pitfall.

America's IRA Centers™ will also explain the legacy advantages of rolling your 401K into an IRA. These include the ability to stretch the period of tax-deferred earnings within an IRA beyond the lifetime of the person who set up the account, typically over multiple generations. And over the course of those successive generations, the investments within the IRA continue to grow at a compounded, tax-deferred rate. Your advisor can help you decide whether or not this powerful legacy option is suitable for you.

America's IRA Centers™ is the nation's only locally-based financial services provider that specializes in IRAs and retirement distribution planning. Denver's America's IRA Centers™ is located at 7800 E Hampden Avenue, Suite 51, in the Tiffany Plaza shopping center, near the corner of East Hampden Avenue and Tamarac Drive. Call today at 303-779-4727 to arrange an initial consultation regarding 401(k) rollovers.

About America's IRA Centers

America's IRA Centers TM offer specialized services in retirement distribution planning, Roth IRA conversions, rollovers from qualified plans, and the emerging arena of Multi-Generational IRAs. America's IRA Centers TM is a community-based resource staffed by local professionals with years of experience in financial planning, safe money solutions, and those aspects of the federal code that impact retirement distributions. Learn more about America's IRA Centers TM, at www.americasiracenters.com or call 888-760-4945.