I understand your question and, since I don't have a copy of the letter you received, I am not sure what the timeline is exactly for you to make a decision, but I do know that you do not feel confident about your potential choices.
Since this is a 401k, you will have the option of taking a distribution of the entire amount and rolling the 401k into an IRA. This is especially useful if the investment choices of the 401k are no longer to your liking or you are uncertain about them. While I am not familiar with the Northrup-Grumman plan (although I am an Navy vet who was on the commissioning crew of the USS Theodore Roosevelt (CVN-71)) built at NN Shipbuilding & Drydock Co), it sounds like you are invested in only their stock through this plan. You possibly have other investments in funds offered by the plan as well. All of these investments can be mirrored in an IRA account, should you choose to do so.
To be very clear, taking a distribution from a 401k plan and rolling it into an IRA (or other qualified plan) is very simple. Any company that offers IRA accounts (banks, mutual fund companies like Vanguard, American Century, etc., brokerages like E*Trade or Charles Schwab or insurance companies) will help you through the process if you open an account with them or roll into an existing account.
So, with the limited knowledge I have of your personal situation and risk tolerance, I would recommend that if you don't have an investment ad visor, you simply opt out of the new company stock/plan and take a full distribution of your account. Then you will have bought some time to roll it into an account of your choosing outside of the plan. Here are some rules for the rolling over of a 401k plan:
Below are the options that are available to you.
- Take a Cash Distribution
If you elect to receive a cash distribution then the check is made payable to you. Distributions made payable to you are subject to federal and state income taxes. Your employer is required to withhold 20% from your distribution check as a prepayment of estimated taxes. Depending on your tax bracket you may owe more or less than 20% when you complete your tax return. In addition, your distribution is likely to be subject to a 10% pre-mature withdrawal penalty if you are under age 59 ½.
- Indirect Rollover
You can elect to take a cash distribution and then deposit the money into your IRA within 60 days. Your employer is still required to withhold 20% for prepayment of federal income taxes. To avoid taxes and penalties, the entire distribution including the 20% withheld for income taxes must be deposited into your IRA. If any amount , including the 20% withholding, is not rolled over within 60 days then that amount will be subject to taxes and possible IRS penalties.
- Direct Rollover
With a direct rollover, you authorize your employer to make your check payable directly to the new custodian for the benefit of your IRA. For example, the check would be made payable to the new custodian FBO XXXXX XXXXX. This is sometimes referred to as a trustee-to-trustee transfer and there is no tax withholding, no taxes, and no penalties with this option. Your retirement savings will continue to grow tax-deferred. In most situations, a direct rollover makes the most sense since it avoids potential tax liabilities and penalties.
Make sure you meet all of the requirements of the letter you received.
Based on what you told me, this is all I can offer at this time by way of an answer. I hope this helped! If it did, please let me know.
I am very grateful for the question and I know you will work your way through this.
Best of luck!
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