Manage Your Plan Assets

Manage Your Plan Assets
Manage Your Plan Assets

At age 59½, you get the green light to take savings from your employer-sponsored plan without penalty. But you don't have to start withdrawing from your plan until age 70½.   Uncle Sam says you have to start annual withdrawals from your employer-sponsored plan by April 1 of the year following the year you reach age 70½. The least you can withdraw is called a “required minimum distribution,” and the government imposes rules for figuring this minimum. In a way, minimum withdrawal requirements work in your favor because they’re designed to help you preserve your retirement funds for as long as possible. So before you opt for income, let's take a step back and assess.

Consider this:

  1. To avoid IRS penalties, you can't withdrawal until age 59½ - but you must begin at least withdrawing the minimum at age 70½.
  2. You will pay income tax on any money you receive from employer-sponsored retirement plan.
  3. If your spouse is still working or you have other sources of income, you may not want to start tapping into this source immediately.
  4. Experts suggest that retirees spend taxable savings first, and employer-sponsored-plan savings last. (That’s because employer-sponsored plans may accumulate more when not taking annual income-tax hits.)

Now, let’s talk options. Every plan is a little different, so check with your former employer about your distribution options at Retirement. You may be able to:

Stay In Plan

Even after you retire, lots of plans let you go your merry way but leave funds behind. What’s your situation? If you don’t need cash right away, you may want to keep your plan assets compounding tax deferred until you're required to start taking at least the minimum distribution at age 70½.

Okay to StayTime to Leave

You don't have to complete any paperwork or make any decisions until age 70½.

If you're age 70½ or older, you have to begin taking at least the minimum distribution.

You can continue to shift money between investments to manage risk and return.

You may not be able to take advantage of certain features (such as loans) now that you are retired.

Your money can grow free of income tax until you withdraw it.

You may not have access to as many investment options as, for instance, a Rollover IRA.

You can always change your mind and take a lump sum, roll to an IRA or annuity, or begin distributions

Your plan may impose restrictions on withdrawals.


You may have to pay a fee for services. 

Take A Lump Sum

Taking a lump sum means getting everything in your account in cash.  This is the total of all your contributions; any employer match (for which you’re “vested”, meaning that you’ve racked up enough years of service to keep the employer match); and any after-tax contributions you made; plus any interest or investment earnings on any of these amounts.  Let’s face it.  There is nothing quite as alluring as a big stash of cash.  But, even if you are age 70½ and must begin taking at least the minimum distribution amount, resist opting for the lump-sum.  You may lose out two ways when you take the money and run.  Both the short- term tax drain as well as the long-term growth opportunity lost.

Roll to an IRA

Rolling employer-sponsored funds to an IRA allows you to take a more active role in managing your funds. It's your own account, held at a bank, an insurance company, or other investment provider, like a mutual fund company or brokerage account. You pick the investments and make all your own decisions or you may ask for professional help. Best of all, your funds are still income-tax-deferred.

Time to RollOr Maybe Not

Your money can continue to grow free of current income tax until withdrawn.

You have to shop for an IRA and fill out paperwork to roll over funds.

You may find a wider range of investment choices than you have in your employer-sponsored plan or a rollover annuity.

A few IRAs may not offer withdrawal services (which means you have to roll over to another vehicles when you are ready for income).

You get the ability to consolidate many plan distributions into one account.

You may have to pay annual administrative or service fees for your IRA.

Roll to an Annuity

Two features that make annuities so appealing to retirees, income-tax-deferred saving plus the ability to get income. If you roll money in your employer-sponsored plan to an annuity, you can go two routes -either a deferred annuity or an immediate annuity. Immediate annuities allow you to start taking income right away.  A deferred annuity allows you to continue to save tax-deferred and allows you to start taking income sometime in the future.  Both types of annuities allow your account balance to continue to grow tax-deferred until withdrawn.

Pros of an AnnuityCons of an Annuity

You can continue to save tax-deferred if you choose a deferred annuity.

Some annuities charge a penalty if you take your money too soon.

You can start taking income right away if you choose an immediate annuity. 

Some annuities charge annual fees to account for the insurance features of the annuity, such as a death benefit or guaranteed income benefits. 

You can choose from many ways to receive income. 

Some annuities may offer only a few investment options or ones in limited asset classes.

Your beneficiaries may be assured a benefit if you die prematurely.

Your ability to receive future income payments is tied to the financial strength of the issuing company.

You’re guaranteed monthly payments. (guarantees based on the claims paying-ability of the issuing insurance company)

An annuity used to fund an IRA does not provide any additional tax deferral benefit, as tax deferral is provided by its Rollover status.

Take Distributions

Some plans allow you to elect to receive scheduled withdrawals directly from the plan. You choose how much to receive and how often … for instance monthly or quarterly. You may be able to change that amount once a year, or more frequently depending on the plan.  Under age 70½ this may be a good options if you need to supplement other sources of retirement income and are looking to forego the legwork needed to set up an annuity or IRA.  However, your plan may not permit direct distributions.  After age 70½ your required minimum distributions kick in.

Not sure which option is right for you?
A financial professional can help determine which of these options is right for your unique situation.  You can speak to your current local financial professional or speak to an ING representative by calling 877-665-8544.

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