What Are My Withdrawal Options?
So it's time to cash in and kick back. Not so fast. You still have a few decisions to make with your DC plan.
There are two numbers you should be concerned with. The first is 55, the minimum age at which you are generally allowed to begin withdrawing from your plan. The second is 70 1/2, the age at which you are required to start taking out your dough. If you don't start withdrawing by then, the government exacts a huge price: a 50% penalty on what you should have taken out.
At 55, you've got several options for how to take out your money. Check with your human-resources department for details on what options your plan allows and prohibits. It might also pay to consult with an advisor to discuss the implications for your taxes and cash flow.
 
Once you hit 70 1/2, you'll need to start withdrawing minimum installments based on IRS projections for your life expectancy.
Your five basic options at retirement are:
 
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    Retirement Option Advantage   Disadvantage  
   
1. Leave it in the plan.
 
Money keeps growing tax-deferred. Can take partial withdrawals beginning at age 55.
 
Plan may limit how often you can take out money.
 
                         
   
2. Take it as a lump sum.
 
All the money is in your hands to do as you like.
 
Must pay taxes in full on distribution and future earnings.
 
                         
   
3. Take it as an annuity.
 
Guaranteed regular payments over your lifetime.
 
Investment results may not be as strong as other options. Expenses may be high.
 
                         
   
4. Take it in regular installments, scheduled over a fixed period.
 
Guaranteed regular payments over whatever period you choose.
 
Amounts you take out may not keep up with inflation. Lacks flexibility.
 
                         
   
5. Roll it over to an IRA.
 
Money keeps growing tax-deferred. Most flexibility for how to invest money.
 
Penalty on any withdrawals taken before age 59 1/2.
 
                         
    What To Do Next:  
    > A To Do checklist for you to read and print out  
    Retirement Plan Questions:  
    > How much can I contribute?
> Do I have enough to retire?
> How safe are my investments?
> What are my withdrawal options?
> Should I invest in a Roth IRA or my DC plan?
> What happens if I change jobs?
> Can I withdraw money before I retire?
> Should I invest or pay off my credit card?
  
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