Best options for a in service distribution?

Hmmm. ESOP stands for Employee Stock Ownership Plan, doesn't it? Is it qualified money? Did you put pre-tax dollars into it? If not, then you can't roll it over into an IRA, and there aren't any penalties for taking the money and spending it. Can you tell us more about the plan?

Dave

Sure. You are correct that it is a employee stock ownership plan where I am issued a set number of shares based on my compensation (the company is privately held so its not publicly traded) each year, as such, I do not have any direct control of the shares themselves (nor can I purchase more shares) as the company was set up as an "Employee Owned" company some years ago when the founder retired.

There is a BOD that meets yearly to declare dividends (you can elect to receive the dividend, which is subject to the penalty/withholding rule or keep it in your account ).

So even though I don't contribute any money to it, it's still treated much the same as any 401k plan with a 10% penalty and 20% withholding if you don't roll it over to a shelter of some sort however you can only withdraw 10% every 10 years .

The value of the stock is completely dependant on the companies financial performance and the value of its assets at the end of each fiscal year so there is always the chance that the stock could lose value. However in the 22 years that I have worked there, that has never happened. The average appreciation has been 6% of late, however in the boom years it was 10-18% for quite a while.

Anyway, the way one person structured his distribution was to open something called a 70t account (or something like that--I know it ended with a T though) and was able get a monthly payment for it. The down side to that plan is that it was fixed amount determined by your age and you were committed to this for set number of years based on actuarial formula of the IRS so I don't know if that's a viable option for myself.

You're thinking of 72(t), but I don't think it will serve your purposes here. Google it!

I gotta run, wife's glaring at me. More on this later.

Thanks for the extra information. Unless you are 59-1/2 years old, you will be subject to penalties for taking early distributions unless you take substantially equal distributions based on the IRS's life expectancy tables for at the longer of 5 years and until you are

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There are several exceptions to the age 59-1/2 rule. Even if you receive a distribution before you are age 59-1/2, you may not have to pay the 10% additional tax if you are in one of the following situations.

You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.

The distributions are not more than the cost of your medical insurance.

You are disabled.

You are the beneficiary of a deceased IRA owner.

You are receiving distributions in the form of an annuity.

The distributions are not more than your qualified higher education expenses.

You use the distributions to buy, build, or rebuild a first home.

The distribution is due to an IRS levy of the qualified plan.

The distribution is a qualified reservist distribution.

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You are in great shape, with much of that debt at 3%, and the rest, only $4k, I'd just try to make extra payments to knock off the $4k. Using the new offers to keep that rate low is a good idea. If the ESOP is pretax and you are permitted to roll the vesting portion to an IRA, that's the way to go. High on the list of investing mistakes is having too much money in one's company's stock. Diversifying as it vests is the way to go. It's very rare that liquidating retirement funds to repay debt (let alone debt at relatively low rates) makes any sense. JOE

In addition to Joe's remarks, the "privately held" status of the company makes it even more important that you take advantage of this opportunity to rollover the funds. Liquidity is reduced and control is largely taken away from you. Take advantage of this situation to change that.