How Is 401K Paid Out?

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   David G. Pipes, CLU®, RICP®

   Business Development Officer, T.D. McNeil Insurance Services, Fresno, California

   401(k) plans can have a variety of payout options.  The option most commonly used is to roll the money into an IRA.  Then the money maintains its tax character and is easiest to handle.  The money can remain in the account without any withdrawals until you reach the age of mandatory distributions.  Then, by law you must start taking out a specific percentage of the account every year until it is depleted.  All distributions from a 401(k) or an IRA are taxed as ordinary income.  There is an exception if the 401(k) was invested in company stock.

   Answered on August 25, 2014

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