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Compare your distribution options in retirement

You have the potential to make retirement the next exciting chapter in your life. Are you ready?

So how do you convert your retirement savings into income?

There are a few ways to structure your payments when you are ready to create an income stream. Once you work with an advisor to create your retirement savings vehicles, you will want to understand how to maximize the benefits of each to your favor without drawing too much income too soon. Let’s take a look at the options so you can know which ones are right for you.

Comparing your retirement distribution options

Many employer-sponsored plans allow you to mix your distribution options. For example, you might take a partial lump-sum payment and use the money to purchase a lifetime annuity. Or use a portion of your assets to purchase an annuity and take Systematic Withdrawals from what you leave in the plan. You could even take Systematic Withdrawals from a deferred annuity, up to a certain limit before the payout period begins, to supplement your income. The chart below offers a synopsis of your options.

  Lump Sum Systematic Withdrawals Annuitization Continual Payout Option
What are the payment amounts?

All or some of the account value.

You decide: a fixed dollar amount or a percentage of your account value. Your choice of fixed or variable payments, or a combination of both. A fixed amount on a fixed schedule, usually five years.
When do you receive your income? Immediately. Your choice: monthly, quarterly, semiannually or annually. Your choice of guarantee periods: lifetime income for you, lifetime income or income over a specified period of time. Monthly over a specified period of time, usually over five years.
How can you invest your income? Once it’s removed from your account, its’s up to you. You can choose to invest your account balance amoung your plan’s options. If you select a variable annuity, you can choose to invest your account balance among the annuities options. Your remaining cashvalue earns interest.
Do you have access to your remaing account balance? N/A for full lump sum.
Yes for a partial lump sum.
Yes. No. Yes: to unannuitized portion of your annuity.
Can you change your withdrawl options? N/A Yes. No. No.
Taxes Due upon withdrawal. An automatic 20% federal tax is withheld and state and local taxes will apply plus a 10% penalty if you have not reached age 59½. Payments are subject to current taxes. The account balance stays in the plan and can accumulate tax-deferred. Payments are subject to current taxes, but are spread over the pay period for greater tax efficiency than systematic withdrawals. Taxes are spread over the payment period.
Effect on heirs Account balance passes to your beneficiaries which gives heirs flexibility in using assets. Account balance passes to your beneficiaries which gives heirs flexibility in using assets. Income can continue to your spouse and/or beneficiaries, depending on the payment period selected. Income can continue to your spouse and/or beneficiaries until end of the payment period.

To learn more about what each of these distribution options are, read this article on transforming your retirement assets into income, to help understand which options may be right for you. Remember, a financial professional can give you deeper meaning and how it can apply to your retirement income plan.

Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.


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