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Jim Lentini: Planning out your retirement income

Posted: March 30, 2009 7:55 p.m.
Updated: March 31, 2009 4:59 a.m.
Many Americans, especially those in the retirement red zone, are facing a new reality regarding their retirement. With most Americans experiencing declines in their 401(k) plans and retirement portfolios as a result of the capital market turmoil over the last several months, many ask, "What do I do now?"

As retirement day gets nearer, it is more important than ever to stop and evaluate your retirement investing strategy.

In fact, if you are within the five years of retirement, or in the first five years since you retired, you have already entered the most critical time of your investment life, the "red zone."

The decisions you make during this 10-year span may have a fundamental impact on how you spend the 20- to 30-plus years to follow during retirement.

Traditionally, retirement plans have allowed participants to access their plans only if certain events occur, such as changing jobs or retiring.

Many retirement plans now offer participants who are currently employed the option of taking distributions from their plans.

These distributions are known as in-service withdrawals.

Many plans permit in-service withdrawals at age 59 1/2. Some profit-sharing plans allow individuals under age 59 1/2 to take them.
In-service distributions from defined benefit plans are generally not permitted before age 62.

The Summary Plan Description (SPD) will state the plan specifics. In-service distributions are typically rolled to a traditional Individual Retirement Account (IRA).

Several types of distributions cannot be rolled. These include, but are not limited to, RMDs (Required Minimum Distributions) and hardship withdrawals.

There are many reasons to consider an in-service withdrawal and advantages of rolling out a portion of your plan to an IRA.

These should be discussed with your financial adviser before considering this option.

The advantages to consider an in-service withdrawal are numerous and will be discussed in a future article.

Jim Lentini, CLU, ChFC, IAR is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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