A one-time payout of the entire balance of a retirement account. When you retire or leave your job, you can take a lump-sum distribution of your 401(k) in cash, but you will owe income taxes on the amount, plus a 10% penalty if you’re under age 59 ½. To avoid a tax hit, you can roll the lump-sum distribution over to your new employer’s plan or to an IRA; you won’t pay taxes until the money is withdrawn.