A lump sum distribution is usually paid off in several payments or all at once in the same year, but this may differ from ones garnered by a traditional IRA or what is called a self employed plan (SEP). Tax laws typically frown on lump sum distributions when cashing out on retirement plans, especially self employed plans where a person's money is saved for the future. People have to pay the taxes for lump sum distributions for SEP since it is considered income and there are penalty's for such an early withdrawal before retirement age. There are ways to get a lump sum distribution whether with an IRA or an SEP despite the risk of taxes.
Here are some considerations to get a lump sum distribution:
- Reaching the age of 59 1/2 while still under your SEP will allow for lump sum distributions from the account instead of a simple liquidation of the plan.
- Disability also gives the person the ability to collect lump sum distributions since obviously one cannot work or become employed to contribute to the SEP.
- Participate in the SEP for more than five years.
- Pay for all the taxes in the SEP account as well as further penalties.
- Did not apply any special exceptions under the rules of the post-1986 lump sum distributions.
Tip: Consult an accountant first who is well-versed in tax laws in order to best understand the do's and don'ts of your SEP and how it may affect you if you choose to do lump sum distributions.
What Others Are Reading Right Now.
6 Things You Think Your Girlfriend Cares About But She Doesn...
Guys, it may be time to refocus your efforts.
Pro Wrestling Tales That Will Make You Feel Like Fighting
Don't get too riled up.
9 Rappers With “Young” In Their Names Who Aren’t So Young An...
They get older, their monikers stay the same age.