As you approach retirement, you are faced with many important and complicated retirement plan distribution choices. Making the wrong decision can be costly. To make the right choices, you have to consider difficult tax laws in light of your age and health, the type of retirement plan you have, whether your spouse has separate retirement funds, your overall financial condition, and your estate planning goals.

One of the most basic choices you will probably have is between a lump-sum distribution and an annuity. Most plans offer this choice. Those who choose to receive their funds gradually through annuity payments are taxed as the payments are received, but will have to decide which of the available tax choices gives them the most after tax dollars. Annuities also come in a variety of types: The basic one for retirement plans is the jointandsurvivor annuity which gives benefits to a surviving spouse as well as the plan participant unless a waiver is made--yet another difficult choice.

Choosing essentially to receive the funds at one time--the lump sum option--can get very complicated. Income tax is owed on the entire distribution unless a rollover is made into an IRA which can have some negative consequences that must be considered. On the other hand, if none of the distribution is rolled over, so-called income averaging may be available to reduce the tax. There are two types of averaging, and not all distributions qualify to use it.

Another decision is when to begin receiving distributions, and how to figure the amount that must be taken out within certain time limits to avoid a hefty excise tax. Retirees with extensive nonretirement plan assets who would like to hold off on receiving distributions to keep the assets accumulating in the plan face the potential of yet another excise tax if they miscalculate.

As complicated as all of this sounds, it is only the beginning. Retirement plan distribution choices also have many important long-range consequences. We are available to evaluate your situation to help ensure that your choices will meet your financial objectives with the smallest possible tax bite.

Give us a call at 392-3400, the initial consultation is always free.