Provided by Jon Gerhardt

Are you retiring soon? Changing jobs? Leaving your company? If so, here's one of the most important questions you'll need to ask yourself: What should you do with your 401(k) or other tax-advantaged retirement plan?

You could, of course, cash out your 401(k) and take a lump-sum distribution. After all, the money is yours, and it's readily available. However, there are some big negatives to cashing out your 401(k).

First, you'll have to pay ordinary income taxes on the money, possibly including an immediate 20 percent withholding. Also, if you're under 55, you may have to pay a 10 percent penalty. Most importantly, however, you'll wipe out a significant source of your retirement savings and lose the advantage of having money accumulate on a tax-deferred basis.

Instead of liquidating your 401(k), you may want to roll the money over to an IRA, either a traditional IRA, in which your earnings grow tax- deferred, or a Roth IRA, which offers tax-free withdrawals provided you meet certain conditions. If you move your 401(k) money into an IRA, consider using a "direct rollover" so the funds go directly from your old plan to your IRA with no withholding.

After you get your 401(k) money into an IRA, what then? Won't you be penalized for taking money out? Not necessarily.

You can make penalty-free withdrawals from your IRA as long as you take "substantially equal periodic payments," as determined by an IRS formula, for at least five years and until you reach 59-and-a-half.

For example, if you start taking these payments at 50, you must keep taking them until you're 59-and-a-half. However, if you don't start collecting this money until you're 55, you'll have to keep making withdrawals until you're 60.

If you think you may get another job soon, you may want to place your 401(k) money in a "rollover IRA," from which you can eventually move assets into a new employer's retirement plan if permissible.

As you can see, there are many tax-related issues pertaining to IRAs, so you'll want to consult with your tax adviser before making any decisions on rollovers.

Aside from moving it to an IRA, what else can you do with your 401(k) if you leave your current employer? For one thing, you can just leave it alone. Even though you won't be able to make any new contributions to your plan, you can probably leave it with your former employer and continue to benefit from tax-deferred earnings growth.

If you choose this route, though, what can you do to boost your income? One possibility is to restructure your investment portfolio. If you have many growth-oriented investments, you may want to shift some of these assets toward income-producing vehicles, such as bonds, but don't abandon your growth vehicles completely; you will need them to eventually provide retirement income.

Ultimately, you can protect your retirement plan, even after a layoff. So take the time to make the right decision -- it's worth the effort.

Jon Gerhardt is a financial adviser for Edward Jones in West Seattle, 7354 35th Ave. S.W. He can be reached at Jon.Gerhardt@edwardjones.com 938-1718.