A lump-sum distribution is when you receive the entire balance of your retirement account, pension, or other qualified plan in a single payment rather than over time. This typically happens when you leave a job, retire, or reach a certain age, and you have the choice of taking the full amount at once.

While getting a large sum all at once can feel like a windfall, it comes with significant tax implications: the full amount is generally treated as ordinary income in the year you receive it. Many people choose to roll a lump-sum distribution into an IRA or another qualified plan instead, which defers the taxes and keeps that money growing for retirement.