Delicate Choices in Hatching Your Nest Egg

After years of accumulating assets to fund yourretirement, you eventually reach a point whenit's time to start making use of those funds.When preparing to access your employer-sponsoredretirement plan or IRA balances, you're going to needto make some important decisions. By understandingyour alternatives, you can make the appropriatechoices for your retirement distributions. Please keepin mind that for tax and legal advice, you'll want tobe sure to consult your attorney or tax advisor forinformation regarding state and federal tax laws.

For starters, there are two basic types of employerretirement plan distributions: periodic (or partial)payments and lump-sum distributions. Pension plans,for example, generally pay distributions exclusivelythrough monthly payments, and the total benefit isusually calculated based on life expectancy. Typically,you have the option of receiving periodic paymentsover your own single life, the joint life expectancy ofyou and your spouse, or a specified number of years(sometimes referred to as term certain). The numberof options you have is determined by your employer.

Instead of periodic payments, some retirementplans require or allow participants to receive their balancesin the form of a lump-sum distribution. If youdecide to go this route, there are two basic options forhandling your lump sum: You can take receipt of yourdistribution directly, or you can roll your distributioninto an IRA.

As you can see already, you may have severaloptions you need to consider. If you have a choicebetween receiving your retirement distributionthrough periodic payments or in a lump sum, youmay be wondering which to choose. As you wouldexpect, the answer depends heavily on your individualsituation. But to help you decide which optionis best for you, following are a few important pointsto consider.

Life Expectancy

The last thing you want to do is outlive yourretirement assets by depleting them too quickly. Amonthly pension option—if you have one availableto you—would alleviate such concerns by providingyou a regular check for the rest of your life.However, you do give up control of your principal inexchange for this dependable income. Receivingyour retirement plan balance in a lump sum givesyou the opportunity to invest your assets elsewhereto help meet your particular retirement needs. Youmay wish to generate income or growth from yourinvestments, or a combination of the two.

Considering Inflation

You need to remember the impact inflation canhave on your investments and the income you expectto generate from them. It's not safe to assume thattoday's income will be enough to cover your expensesa decade or more from now. Choosing to receive amonthly pension benefit locks you into a specific dollaramount paid out over your retirement years.Pension plans generally do not increase these paymentsto compensate for inflation.

Once you've decided on the type of distributionyou want, you may still have many investment decisionsto make. Your goals and objectives will be differentnow that you've actually reached retirement.To help assess your situation, you should work withyour financial consultant to address your newfinancial needs.

Joseph F. Lagowski is vice president, investments, and a financialconsultant with AG Edwards in Hillsborough, New Jersey. He welcomesquestions or comments at 800-288-0901, or visitwww.aged wards.com. This article was provided by AG Edwards &Sons, Inc, member SIPC.