Rolling over those IRAs.

Your retirement money may be the largest sum you ever receive. Understanding your choices for managing it will help you make the most of your savings.

You've spent years building your savings in your employer's retirement program, and now, with the tax law effective January 1993, you need to decide whether to roll over to another qualified retirement plan or switch to an Individual Retirement Account (IRA) right away.

Retirement is only one reason you may be eligible for a distribution. Others are:

* You are changing jobs.

* You have been laid off.

* You work for a company that has changed ownership or has merged.

* Your company's retirement plan has been terminated.

* You are self-employed and terminating your Keogh or Simplified Employee Pension (SEP) plan.

* You are the beneficiary of your spouse's retirement plan at his or her death.

* You have become permanently disabled.

Whatever your reason for receiving a distribution, your primary concern will be to avoid unnecessary taxation.

A qualified plan is one that meets certain criteria of the Internal Revenue Code regarding tax reporting, participant eligibility and benefits offered. Most corporations offer some form of qualified retirement plan, and many allow you to participate in more than one plan. These plans may include:

* a pension plan,

* a thrift plan,

* a profit-sharing plan,

* a stock ownership plan (ESOP), or

* a salary-deferral plan (401K).

Other types of employer-sponsored plans include SEPs, Keoghs (if you're self-employed) and tax-sheltered annuities (403 [b]).

There are many ways to manage your retirement money, each with its own tax ramifications. Your first major decision will be whether to keep your money in a tax-sheltered plan or take it immediately and pay taxes on it. For most people, deferring tax on their money by keeping it in a qualified plan is more advantageous. But you may be among those who would benefit more from an immediate distribution of your assets. Consider if the choices below are right for your situation.

TAX-SHELTERING YOUR MONEY

Retaining the tax-sheltered status of retirement is a popular choice, especially for those whose working careers will continue. There are several kinds of tax-sheltered plans that may be available to you. But to avoid the 20 percent withholding tax, you must roll over your money directly into one of these plans. If you take a check from your employer, you have 60 days to deposit the check and an amount equal to the withholding into a plan to qualify for a refund and protect your savings from additional tax penalties. Listed below are some of the retirement plans you can choose from.

1. A rollover IRA -- Sheltering money in a rollover IRA allows you to manage your funds with maximum freedom, investing as you see fit and accumulating additional tax-deferred earnings.

2. Another qualified plan -- You may have the choice of rolling the money from your previous employer's retirement plan into your new employer's retirement program.

3. An individual retirement annuity -- Some people choose to buy annuities with their retirement money, which can also defer taxes. An annuity provides you with a specific amount of annual income for life.

4. Your current retirement plan -- Usually, if the assets in your current employer's plan are valued at $3,500 or more and you haven't reached retirement age, you can simply leave your assets in the plan. (However, you won't have this choice if the plan is being terminated or the company is merging with another firm.)

TAKING THE DISTRIBUTION

If you have immediate need for your money, you will automatically pay a 20 percent withholding tax, except on any after-tax contributions. There may also be additional federal and state taxes due at year end. In addition, if you are under age 59 1/2, you may pay a 10 percent early withdrawal penalty (age 55 if you are leaving your job).

You can choose to receive your retirement fund in one of two ways:

1. A distribution of the entire amount -- If you receive all of your money in one lump sum, the 20 percent withholding tax must be deducted by your benefits administrator. You may owe additional tax when you file your income tax return for the year. If you're older, you could get a break, because you may be eligible for favorable tax treatment under forward averaging rules.

2. Periodic payments -- If you don't need all of your money immediately, you may be able to arrange to have it paid out to you from the plan in equal installments, which must be made at least annually. These payments would be allocated based on your life expectancy and aren't subject to the 10 percent early withdrawal penalty, regardless of age.

A quick review of the steps below will prevent any last-minute confusion about handling your distribution.

1. Decide whether you want to roll over your retirement distribution. Remember, to avoid the 20 percent withholding tax, you must transfer your distribution to another qualified plan, or have the check made payable to the new plan trustee, instead of having the check made payable to you.

2. Be sure to note the date you receive the distribution. If you roll over your distribution to a qualified plan after taking a check from your employer, you have 60 days from this date to implement a plan for the management of your money.

3. If you are about to take another job, find out if your new employer's plan will accept a rollover from your old plan.

4. If you wish to roll your money to an IRA:

* Decide where you want to have your assets transferred. This can be handled by a brokerage firm, bank, mutual fund company or the qualified plan of your new employer.

* Set up your rollover IRA with this trustee, and let your benefits administrator know the firm's name and your account number so he can transfer your distribution directly.

* If you think you may want to hold out some money but you're unsure exactly how much, it is better to roll more into your IRA than less. You can always withdraw funds before the tax year concludes. But if you do not roll enough into your IRA before the 60-day period is up, you can't add it later. (Note: If you are between age 55 and 59 1/2 and the distribution relates to leaving your job, you would be unnecessarily subject to the 10 percent early withdrawal penalty by rolling over to an IRA.

Betty Emerick is the Anchorage branch manager for Charles Schwab & Co. Inc. She is a Certified Financial Planner and a CFA candidate.