20% Mandatory Withholding on Lump Sum Distributions

The Unemployment Compensation Amendments of 1992 imposed a 20 percent mandatory withholding tax
on lump-sum distributions that are not rolled over into another qualified retirement plan, annuity, or individual
retirement account (IRA); liberalized rollover rules; and required plan sponsors to transfer eligible distributions
directly to an eligible plan if requested by the participant. ¹

Notes:

Source: EBRI, History of 401k Plans: An Update [↩]

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Some Myths About 401k’s
Myth 2: 401(k) participants don’t take an interest in their retirement plans.

• In reality, Fidelity found workplace participants are increasingly more engaged in their plans. In 2010, approximately three out of four active participants contacted Fidelity via the phone or over the Web. And more than 1.1 million workplace participants took advantage of Fidelity’s online guidance tools.

• Of those who used the savings tools, nearly half (47%) increased contributions to their 401(k)s by an average of three percentage points (from 4% to 7%).

• When employees sought Fidelity’s comprehensive guidance with their investment strategy, one in five made adjustments to their portfolio from suggestions based on their age and target retirement date.
Fidelity Investments
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401k Facts

$400,000
is the expected amount of money the average worker in a 401k retirement plan is expected to amass, given ideal conditions, over a thirty year career. However, the actual average for most people is only about $60,000 largely due to "leakage": withdrawals, missed contributions, hardship borrowings, etc. New School for Social Research, as reported in Human Resource Executive magazine

20% Mandatory Withholding on Lump Sum Distributions

Some Myths About 401k’s

401k Recent Articles

401k Facts

$400,000