Guidelines for tapping retirement assets

McLEAN, Va. (10/1/07)--If you're retiring soon but clueless about which pot of funds to tap when, become familiar with a few rules of thumb (USA Today Sept. 24).

Remember: There are exceptions to every rule and each person's situation is different. Combine this general advice with professional help from a trusted adviser to make sure your withdrawal plan is right for you.

• Withdraw taxable money before tax-deferred accounts. This allows tax-advantaged money to continue to grow tax-free and build a bigger nest egg. There are exceptions--for example, if you have a particularly large Individual Retirement Account (IRA)--so consult with a professional about your circumstances.
• Take as much or as little from your Roth IRA as you need--tax- and penalty-free--once you reach age 59 ½ and the account has been opened for at least five years. There's no minimum distribution schedule, and--unlike regular IRAs--a Roth IRA can be used to build up a stash of cash to leave for beneficiaries.
• If you're working in retirement and temporarily in a high tax bracket, consider withdrawing Roth IRA assets before you dip into your 401(k).
• Try to wait as long as possible to take monthly Social Security payouts. The longer you wait, the higher your monthly payouts will be, based on every year you wait up to age 70.
• Avoid the 10% early withdrawal penalty on traditional IRAs by taking substantially equal periodic payments (Alanat News June 1). Annuitize for five years, or until you turn age 59 ½ (whichever is longer), by taking annual cash withdrawals based on your life expectancy as predicted by the Internal Revenue Service (IRS). Visit irs.gov for more information. For example: If IRS actuarial tables predict you'll live another 20 years, you can withdraw 1/20th of your balance the first year, 1/19th of your new balance the second year, and so on. But if you change your distribution schedule, you'll be socked with the 10% penalty (SmartMoney.com).

courtesy of cuna.org