No. of Recommendations: 2
If your friend takes a lump sum distribution payable to him/her, the full $150,00 wil be considered taxable income and they wil have to pay taxes on the full amount. Since this is a large amount, they will be in a pretty high tax bracket.
The best thing to do is transfer the money from the 401k, (I'm assuming its in a 401k)and transfer it to an IRA account. An IRA of that size should come with no service fees. Your friend should try to open an account at a firm like Vanguard or Fidelity, where you can invest in hundreds of mutual funds without transaction costs.
Your friend can then set up monthly withdrawals, this way you only withdraw the amount you need when you need it. Then you only pay taxes on the amount withdrawn.
If a discount broker isn't a viable option, then shop around at your local banks to open an IRA.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.