Forward Averaging
Treating lump-sum retirement-plan distributions as if they occurred over a five- or ten-year period. Forward averaging is available only to qualified plan participants who were born before 1936 and meet certain requirements.
Investopedia Commentary
This treatment results in the distributions being taxed at a lower rate than the individual's ordinary tax rate.
To be eligible for the capital gains and forward averaging treatment, qualified plan distributions must be in the form of a lump-sum distribution.
Note: The five-year income averaging is repealed for taxable years beginning on or after January 1, 2000.
Related Links
Introductory Tour through Retirement Plans
Tis The Season For Required Minimum Distributions
Preparing for the RMD Season - Part 1
Preparing for the RMD Season - Part 2
See also: Active Participant Status, Capital Gains Treatment, Defined Benefit Pension Plan, Pension Plan, Qualified Distribution, Qualified Retirement Plan, Variable Death Benefit