What are Periodic Distributions from a 401(k)?

Periodic distribution is a planned intermittent payment of cash from a 401(k).

If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is.

The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer.

Technically the definition of periodic payments by IRS standards is regularly scheduled payments for 10 years or more, as with pensions and annuities. Non-periodic payments are essentially treated the same. They are supposed to have a 10% withholding, but this is easily side-stepped.

The IRS expects to see form W-4s for all of this distributions. The money remaining in the account continues to grow tax-free until its withdrawal. Periodic withdrawals must at least satisfy RMDs (required minimum distributions) if taken after age 70 ½.