Make the Most of Your Retirement Savings

It hasn’t been easy, but, over the years, you’ve carefully watched your budget and now you’re ready for a comfortable retirement. Good. You’ve earned it. But, before you get caught up in travel brochures, do one more thing: carefully consider your retirement plan distribution options. Unless they’re properly handled, taxes and penalties¹ can eat away at some of your precious savings.

When you’re ready to retire, you generally have three choices of what to do with your retirement plan assets:

1. Leave Your Money in Your Plan and Request Distributions as Needed

Keeping your money in your employer-sponsored plan is the simplest of the available options. You don’t have to complete any paperwork to remain a participant.² You’ll be responsible to monitor and adjust your investments as needed. Your account could lose value. And in retirement, there’s little you can do to replenish your savings.

2. Roll It Over

Millions of people who want a dependable stream of income choose to transfer all or a portion of their retirement savings into a tax-qualified fixed annuity. With benefits such as continued tax deferral and income for life³, an annuity can help eliminate one of your greatest retirement concerns: outliving your savings.

For example:
Let’s say you’re a 65-year-old male with $100,000 in your 401(k). You can use that money to purchase an annuity that provides guaranteed income payments for the rest of your life. Based on current interest rates (this can vary daily), $100,000 can “buy” monthly income of approximately $725. Of course, the more money you roll into an annuity, the larger your income payments will be.

Other tax-deferred rollover options – such as an Individual Retirement Account (IRA) – also are viable options. An IRA with fixed, guaranteed rates will help conserve your savings until you need them. Many people choose to split their retirement savings between an IRA and an annuity. This option lets you continue to earn interest on a portion of your savings and receive immediate, regular income from the rest.

3. Take the Money and Run

While the idea of receiving a lump-sum cash payment may be appealing, you’ll immediately lose 20 percent of your hard-earned savings to the government in mandatory federal income tax withholding (you may pay more if you’re in a higher tax bracket). Additionally, if the remaining balance is invested, the earnings will be subject to tax again.

For more information on tax-qualified annuities or other distribution options, contact your financial adviser or your plan administrator.

¹ If you take a distribution from a qualified retirement account before age 59½, you could be assessed a10 percent early-withdrawal penalty

² If your account balance is less than $5,000 (not including any rollover money from a past employer’s plan), your employer may cash out your balance without your consent.

³ “Guaranteed income for life” is a feature of a “life only” annuity. There are many types of annuities with other features to consider).

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