How to take distributions
A majority of retirees find one or a combination of the following three distribution options to fit their needs:
- Periodic withdrawals — Most retirement plans offer options for withdrawing money on a set schedule (such as monthly, quarterly, yearly, etc.). You can set up this schedule so a fixed percentage is withdrawn every period, allowing you to control your distributions so you don't outlive your savings.
- Lump-sum distribution — If you have a major investment (like buying a business or a retirement home) for which you need a large sum of money, you can withdraw all your savings at once. However, taking a large sum at once may increase your taxes substantially and eliminates the benefit of keeping your savings in your retirement plan where they can continue to grow tax deferred. In addition, the government will withhold 20% of your distribution for taxes.
- Direct rollover — If you wish to move your savings to another vehicle and want to avoid the 20% withholding, you have the option of rolling over your retirement plan savings into a qualified vehicle such as an IRA or annuity.
