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Subject:  Re: Leave in 401(K) or rollover to IRA? Date:  9/2/1999  2:14 PM
Author:  BGPenhollo Number:  13626 of 96882

"If your spouse was over the age of 55 on separation, if you are in a 31% marginal tax bracket today and expect to stay there, and if you have no need for the cash in retirement, then you could cash out today to enjoy a minimum income tax burden on your family over your lifetime.

Let me see if I understand some of this.

By taking a lump sum distribution the taxes would be
less than 20% for cap gains. The advantage is a smaller tax hit today versus a longer and higher tax hit in the future - assuming that my MTR stays at 31%.

I am not sure I understand the comment about not needing cash in retirement. An example might help me.

Let's say I take a $500,000 lumpsum distribution and
pay the 15% tax or ($75,000). Doesn't this now make any investment from the $425,000 my new basis. If I left it and took it on a yearly basis, I'd be paying 31% in taxes.

Is the concern the loss of the 401K or IRA tax shelter for future returns?

Is it possible to take a Lump Sum and roll that into
a ROTH which shelters future gains and withdrawal from taxes?


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