How to Manage Retirement Distributions

While retirement may be a long way off, it never hurts to debrief yourself about the best way to approach this life stage before you're thrust in the situation. Check out these tips to help you make the most of your retirement distributions.

Instructions

Difficulty: Moderately Challenging

1. Understand your options. You have several options for how to take your retirement plan distributions, such as those from a corporate 401(k) plan, IRA or stock bonus plan. You can take all your payments in a lump sum; receive the funds as an annuity; roll the funds over; take a partial withdrawal, or select a combination of these options.
2. The option you choose will depend on what type of plan you're in and the tax treatment each option will require. For instance, if the money you invested into a retirement was taxed, you will receive the money back tax-free. After-tax investments include your post-tax contributions to a 401(k) plan, or non-deductible IRA contributions.
3. Consider taking distributions in a lump sum to defray the cost of an assisted living facility or to buy a second home or launch a business. However, be aware that some companies restrict this option. Also, keep in mind that as long as your money remains in a company-sponsored plan, earnings on it will accrue tax-free; once you withdraw the funds, the tax shelter ceases.