Your 401k or 403b provider is required to do a 20% withholding if you do a distribution from your retirement plan.  Often they will encourage you to do a "direct rollover" into an IRA to avoid the tax withholding. Here's why- any distribution from an IRA is taxed at 10% and you even have the option of instructing your custodian not to withhold taxes.  It's your decision. 

The folks at TurboTax explain the 20% withholding rule.

Folks appear to be under the impression that once they've had taxes withheld on distributions from their 401(k)s or retirement plans, they've "already paid taxes" on the withdrawals and don't need to report the withdrawal or the income tax on their tax returns... "I've already paid the tax on this; why do I have to pay it again?"

Here's the straight talk on this situation: in general, when a 401(k) or 403(b) plan pays a distribution to you, the federal government requires that 20% of the distribution is withheld from the distribution for income taxes. This is just like the federal income tax withheld from your W-2... it's kind of an "advance payment" on the income taxes that will be due on the taxable income you're getting as a result of the withdrawal. There are certain exceptions from this withholding rule, like when you receive payments over time or when it's a distribution due to hardship.