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RETIREMENT PLAN DISTRIBUTIONS

• How should I take distributions from my retirement plan?

• When should I take a lump-sum distribution from my retirement plan?

• What should I do about my retirement plan assets in my ex-employer's
  plan if I change jobs?

• Can creditors get at my retirement assets?

• How will my state tax affect my retirement withdrawals?

• Can moving to another state when I retire save me taxes on my retirement
  plan?

• What is a reverse mortgage?

ANNUITIES 

• Is it better to take an annuity or a lump-sum distribution?

• What is a joint and survivor annuity?

• Can I change from a joint and survivor annuity if it doesn't meet
  my needs?

IRAs

• When shall I use a rollover to my IRA?

• Is there a downside to an IRA rollover?
  

• Everything in a lump sum;
• An annuity;
• A partial withdrawal (leaving the balance for withdrawal later);
• A rollover; or
• Some combination of the above.

Some plans tilt more than others towards certain withdrawal options. Annuities are commonest with pension plans. The other types of plan favor the other options. But in many plans, all or most options are available, and combinations may be available.

You may want to preserve the tax shelter as long as possible, by withdrawing no more than you need.

In some plans, your retirement assets will be distributed in kind—as employer stock, or an annuity or insurance contract.

Timing your withdrawal can be a factor, too. Withdrawals before age 59 ½ risk a tax penalty. And withdrawal is generally required to start at age 70 ½, reinforced with a tax penalty and other rules, except for Roth IRAs, and for non-owner-employees still working beyond that age.

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1. If you don't need the assets to live on, try to continue the tax shelter.
2. Transfer (roll over) the assets to the plan of your new employer, if that plan allows it (this can be tricky, though).
3. If going into your own business, set up a Keogh and move the funds there.
4. Roll them over into your IRA.

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1. While withdrawals are generally taxable in states with income tax, some offer relief for retirement income, up to a specified dollar amount.
2. If your state doesn’t allow deduction for Keogh or IRA investments allowed under federal law, these investments—and sometimes more—may come back tax-free.
3. State tax penalties for early withdrawal (before 59 ½) or inadequate withdrawal (after age 70 ½) are unlikely.

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If you move from a state with a high income tax, such as New York, to one with little or no income tax (Texas, Nevada and Florida have none), you will indeed save money on state income tax. 

However, establishing residence in a new state may take as long as one year; if you retain property in both states, you may owe taxes to both.  

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Retired people may want to consider the reverse mortgage as a way to generate cash flow. A reverse mortgage allows homeowners age 62 and over to remain in their homes while using their built-up equity for any purpose: to make repairs, keep up with property taxes or simply pay their bills.

Understand that reverse mortgages are rising-debt loans. This means that the interest is added to the principal loan balance each month, because it is not paid on a current basis. Therefore, the total amount of interest you owe increases significantly with time as the interest compounds. Reverse mortgages also use up some or all of the equity in your home. 

All three types of plans (FHA-insured, lender-insured, and uninsured) charge origination fees and closing costs. Insured plans also charge insurance premiums, and some impose mortgage servicing charges. Finally, homeowners should realize that if they're forced to move soon after taking the mortgage (because of illness, for example), they'll almost certainly end up with a great deal less equity to live on than if they had simply sold the house outright. That is particularly true for loans that are terminated in five years or less.

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• An annuity preserves the tax shelter for funds not yet paid out as annuity income, continuing to grow tax-free to fund future payouts.
• A lump sum withdrawal may be preferable for those in questionable health.
• Or consider an annuity with a "refund feature", that guarantees a fixed sum to your heirs should you die earlier than expected.
  

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1. You want to, or have to, take a distribution from your employer’s plan and want these funds to continue to grow tax-free in your own IRA.
2. As a self-employed, you are terminating your Keogh plan or retiring from business and want to continue the tax shelter for these distributions.
3. You are the beneficiary of your deceased spouse's retirement plan and want to continue the tax shelter for these distributions in your own IRA.

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1. You will lose federal law protection against creditor claims on your retirement assets. However, your state law may offer protection.
2. Rollovers from company or Keogh plans may take away your spouse’s right to share in plan assets.
3. IRAs can’t claim the limited tax relief allowed on lump-sum distributions.

TIP: To avoid tax hassles, rollovers should be done between the trustees of the plans involved, and not as a do-it-yourself.

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