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When you leave a company, you may be entitled to money from the employer’s pension, 401(k) or some other form of employer-sponsored retirement savings plan. That distribution, paid in one taxable year, is called a lump sum distribution.

But be careful: When you receive a lump-sum distribution from your 401(k), for example, all of the money you receive from the plan will be immediately taxable unless handled properly.

Your 401(k) options include:

1.Transferring or “rolling over” your 401(k) money to an Individual Retirement Account or annuity (IRA). The money can be transferred directly to the IRA to avoid penalties and continue the tax-deferred status. This means your hands never touch the money. Instead, it is transferred directly into the IRA by your current employer. You can also take receipt of the lump sum and then deposit it yourself within 60 days to another qualified new retirement plan. This gives you short-term access to the money—but there is a catch. Your employer must withhold 20 percent for federal income taxes from your taxable distribution, so you may only receive 80 percent of your money. To illustrate, consider these tax consequences for a moment: If you withdrew a $50,000 lump-sum distribution from your 401(k) before age 59 ½, all of which is taxable, $10,000-or 20 percent-would be withheld for federal taxes. The distribution would be subject to ordinary income taxes as well as a 10 percent penalty, which in this case could be an additional $5,000. But, if you roll the money over into one or more IRAs, be sure you have established special “conduit” IRAs. In these IRAs, if the money from your lump-sum distribution is not mixed with any other funds, you may be able to transfer the money to another employer’s 401(k) plan, if you choose.

2.Move the money to your new employer’s 401(k) plan, if permitted. After all, the 401(k) is a savings plan of choice for so many workers because it not only offers tax advantages, but also often includes a matching contribution from the worker’s employer-say, 50 cents for every dollar that the employee invests, to a certain limit. Also, people who participate in a 401(k)-or a 403(b) plan for employees of hospitals, schools, colleges and non-profit organizations-can often borrow from their retirement accounts. That option usually is not available with an IRA. Keep in mind there is usually a waiting period of months or a year before you can enroll in your new employer’s plan.

3.Leave the money where it is, with your current employer’s 401(k) plan. The decision may come down to who offers the best investment choices for your-your old company’s plan or the new one.

4.Take a partial withdrawal.