When the time comes to take money from your retirement plan — either because you're changing jobs or retiring - you'll need to decide what to do with your retirement savings.

You have several choices for handling an eligible payment, or distribution, from your employer's retirement savings plan:

• Cash out your money in a lump-sum distribution.
• Keep your money in your former company's plan if you're satisfied with your investments. If you have less than $5,000 in the plan, you may not be able to leave your money there.
• Roll your savings over to your new employer's plan if it accepts rollovers.
• Rolling your savings over to an IRA.

Any cash distribution that isn't rolled over to an eligible retirement plan within 60 days of distribution is subject to income tax and, possibly, a 10% early withdrawal penalty if you're under age 59½.

This table compares considerations for each distribution option.

Compare Your Retirement Savings Distribution Options
Choose a Rollover IRA	Move to your new employer's plan	Leave in your former employer's plan	Cash out
Benefits for you
Preserves tax advantages No tax penalties Potentially more investment choices Early distribution withdrawal options for certain situations Flexible distribution options Potential estate planning benefits Professional investment assistance	Consolidates retirement assets Preserves tax advantages and avoids early withdrawal penalties May be eligible to take withdrawals at age 55 in certain situations May provide loan provisions	Ease and simplicity Preserves tax advantages and avoids penalties May be able to take withdrawals at age 55 in certain situations May provide loan provisions	Easy access to assets
Things to consider
No loan provisions Ongoing contributions generally not permitted Required minimum distributions (RMDs) begin at age 70½ Expenses and fees may be higher	Potentially limited investment options Potentially limited withdrawal options Subject to all provisons of new plan Generally, no professional investment assistance provided by plan Generally, RMDs begin at age 70½; plan may permit nonowner employees to delay RMDs until after 70½ if they continue active employment	Potentially limited investment options No consolidation of retirement assets You may have to contact your former employer for any questions or help Generally, no professional investment assistance provided by plan Generally, RMDs begin at age 70½; plan may permit nonowner employees to delay RMDs until after 70½ if they continue active employment	Entire amount is taxed as ordinary income Loss of tax-deferred growth potential 10% early withdrawal penalty if you're under 59½ State and local taxes may be due 20% mandatory up-front federal income tax withholding

Rollover IRAs

You may want to consider rolling over your savings to an IRA for these reasons:

• You can use a rollover IRA to keep any eligible funds growing tax deferred until you're ready to withdraw them.
• There are no limits on the amount you can roll over.
• If you have your tax-deferred account distribution rolled over directly from the employer plan to a traditional IRA, the transfer won't have income tax consequences.

Direct rollover to a traditional IRA

A direct rollover to a traditional IRA is the easiest way to roll over your retirement savings and avoid income tax concerns. The plan trustee completes the rollover.

• You won't be taxed until you withdraw funds from the rollover IRA.
• Your money will continue to grow tax deferred.
• If you have a designated Roth account within your employer's plan, you can't roll over those account assets to a traditional IRA.

Direct rollover to a Roth IRA

You can roll over your designated Roth account assets directly to a Roth IRA.

• Your money will continue to grow tax deferred.
• You'll be able to withdraw both your contributions and earnings tax free during retirement if you meet the tax law's requirements.

Roth IRA conversion

You can roll over a non-Roth retirement plan account directly to a Roth IRA, but it's complicated and involves tax consequences.

• You'll pay income tax on pretax or deductible contributions you and your employer have made to the plan account and on account earnings you roll over.
• If you pay these taxes from your plan account, you'll have less money to invest in your Roth IRA.

Whether a Roth conversion is right for you depends on numerous factors, but, in general, a Roth IRA may be beneficial if you:

• Think you will be in the same or a higher tax bracket when you retire than you are now.
• Have some time until you plan to retire. The younger you are, the more you generally benefit.
• Currently have a low account balance but expect the value of your account assets to significantly appreciate in the future.
• Don't think you'll need to use all of your retirement savings. Converting to a Roth IRA could allow you to provide your beneficiaries with income-tax-free funds.

Company stock

If employer stock in your retirement plan account has increased in value since you bought it, you may want to consider using a net unrealized appreciation (NUA) strategy to reduce your overall taxes.

• You receive the company stock as part of a qualifying distribution rather than rather rolling it over to an IRA.
• You pay ordinary income tax only on the plan's cost basis in the stock — basically, the purchase price.
• When you eventually sell the stock, you pay taxes on the NUA — the difference between the shares' cost basis and their market value at distribution — at lower long-term capital gains rates regardless of how long you've owned the stock in the plan.
• If the stock increases in value after you receive the shares, the gain is taxed at either the short-term or long-term capital gains rate, depending on how long you've held the stock.

You may also have the option of receiving your retirement benefits in installments or as an annuity.

This information is not intended as tax advice. Investors should consult a tax advisor.