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susanscheirer · Feb 25, 2009, 10:29 AM

I recently resigned from a company where I contributed to a retirement savings plan. In the mail after my employment was terminated, I received a check for the entire amount of the savings.

Is there a time limit to when I need to roll this money into an IRA so I do not have to pay taxes?
And if I decided to keep part of the money and not roll it over, would I add this as income and pay appropriate tax for my bracket, plus 10% penalty on JUST the amount I decided to declare?

I am 38, engaged and wanted to use part of the money for the wedding coming up in October.

Thank you!
Susan

ebaines · Feb 26, 2009, 10:06 AM

My advice is to roll the entire amount to an IRA. You have 60 days to do this, so don't waste time. - if you fail to meet the deadline the entire amount is considered a distribution. You are correct that if you don't roll the entire amount over the portion you keep will be taxed as ordinary income and will also be subject to the 10% early withdrawal penalty.

One question - are you absolutely sure that your old employer didn't withhold 20% for taxes? If they did, that 20% is considered a distribution UNLESS you add that amount back into the rollover account.