I’m thinking about retirement, what should I do?

New York -  After years working to save for retirement, your retirement savings are about to start working for you by providing an income for years to come. If an employer’s plan holds some or all of your retirement savings, you usually have three options when you retire:

Distribution in cash - Taking a withdrawal from an employer's plan may subject you to some very stiff taxes and penalties. Taking such a distribution triggers an automatic federal income tax withholding of 20 percent on the portion of the distribution that is eligible for rollover and, if you are in the 36 percent tax bracket, you risk losing as much as 16 percent more to federal taxes, before even including state and local taxes. In addition, a 10 percent penalty will usually apply if you are younger than 59 1/2, or if you are separating from service before age 55.

Keep the cash in your employer's 401(k) plan - Remaining invested in your employer-sponsored plan avoids current taxes and penalties, and may offer other advantages unavailable elsewhere, but you may also have less control over your investment options and more restrictions on accessing your money.

Rollover IRA - Using a Rollover IRA to maximize your eligible distribution from your employer's plan provides significant benefits and protects your savings from current taxes and penalties. A Rollover IRA is a type of Individual Retirement Account designed so eligible distributions coming from an employer-sponsored or other tax-deferred retirement plan can remain invested on a tax-deferred basis. The benefits of Rollover IRAs include: more investment choices, flexible access to your assets and the ability to consolidate withdrawal a number of employer-sponsored retirement plans that you may have acquired during your working days.

Income Annuity - If you are concerned about outliving your income, you may want to consider using some of your retirement plan money to purchase an income annuity. Issued by an insurance company, an income annuity converts retirement assets into a regular stream of income payments. Once payments begin, no withdrawals are allowed. Some plans do offer the ability to purchase an annuity. 

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