Posted by Nancy Hecht, CFP®, AIF®
Q: I am getting ready to retire and may need some of the money from my company plan right away. Is there any way I can avoid the 20% automatic withholding if the proceeds are paid out to me?
A: You state that you “may” need some of the money right away. In that case I would open up a Rollover IRA, have the proceeds from your company plan sent directly to that account, but have all of the funds deposited into a cash account. If you need to withdraw some money, you will only pay your ordinary income tax on what you withdraw vs. 20% on the whole account balance. If you determine you do not need to take a withdrawal, or can allow the bulk of your account to grow, you can them invest the balance of your account.