Knowing when you may or may not begin distributions from your retirement savings without penalty or to avoid penalty is an important part of your retirement plan.

Distributions do not only occur due to retirement. Although frequently the case, distributions can be taken on many other occasions and for other reasons. Some examples would be:

· Job Change
· Plan Termination
· Death
· Illness
· Disability
· Loans
· Early Retirement
· Mandatory Age (the age at which law requires distributions to begin)

DISTRIBUTIONS FROM QUALIFIED PLANS, 403(b)s, 457s & IRAs
Rules have been significantly simplified for required minimum distributions from qualified plans, IRAs, section 403(b) annuities, and section 457 deferred compensation plans. The new rules are less complex in that they reduce the amount of distributions required to be taken each year for the majority of employees and IRA owners.

The regulations provide a simple, uniform table that most employees can use to determine minimum distributions during their lifetime. If the employee's sole beneficiary is their spouse and the spouse is more than 10 years younger than the employee, the employee can use the longer distribution period of the joint life/last survivor life expectancy of the employee and spouse.

The new rules provide greater flexibility in choosing a beneficiary, now permitting the beneficiary to be chosen as late as the end of the year following the year of the employee's death; allowing that the beneficiary can be changed by disclaimer after the employee's death.

If the employee dies after the required beginning date and has a designated beneficiary, the distribution period is the beneficiary's life expectancy for the year after death reduced by one for each subsequent year. When an employee dies after the required beginning date without a designated beneficiary, the distribution period is the employee's life expectancy for the year of death reduced by one for each subsequent year.

403(b) Annuities (TSAs / TDAs)
403(b) account balances accrued as of December 31, 1986, are not subject to the required minimum distribution rules, until the year in which they turn age 75.

The regulations require an IRA trustee to report the amount of the required minimum distribution from the IRA to the IRA owner or beneficiary and to the IRS.

For more concise information and help in determining your best course of action please consult with your tax advisor.

Request a RMD (Required Minimum Distribution ) calculation.
You must have accounts with MEA Financial Services/Paradigm Equities, Inc. for us to be able to provide you a RMD calculation.

METHODS OF DISTRIBUTION
Annuity Distributions
Although other methods of distribution have gained popularity over taking distributions in the form of an annuity, some plans offer no other option than annuitization.

    Annuity pay outs include several options:

· joint and 50% survivor,

· joint and 100% survivor,

· single,

· or joint and term-certain.

    Disadvantage:
The disadvantage is that the participant is locked in at the then interest rate with an irrevocable fixed income stream.

Discretionary Distributions
Discretionary distributions are any payouts that are not the result of annuitization, loans or lump sum distributions. They are payouts taken at the the participant's discretion and do not have to be structured. They can be started, stopped, adjusted up or down, or they can be structured so that withdrawals will be made on a systematic basis.

Pension and profit sharing plans typically do not allow discretionary distributions. Their plans are normally written and designed for lump-sum or annuitized payouts. Payments from IRAs and SEPs are normally discretionary, thus a qualified plan participant who wants this flexibility may want to consider the advantages of rolling their qualified plan funds to an IRA.

Loans
Although it could be argued on whether loans should be considered distributions, they are an outflow of money from a retirement plan. Loans taken in accordance with the law and plan provisions are not treated as taxable distributions, nor are they subject to penalties. Therefore they can have an advantage over regular distributions and should be considered by participants for some needs.

However if you default on a loan you should receive a Form 1099-R reporting the outstanding loan as a distribution from your plan. This income is to then be reported as ordinary income on your tax return. If you are under the age of 59 1/2, you are also subject to a 10% additional tax on premature distributions.

Lump Sum Distributions
The IRS definition of a lump-sum distribution includes the following:

· is taken from a qualified pension, profit-sharing or stock bonus plan,

· is made in one taxable year,

· is the entire balance in a participant's plan.
Note: For this purpose, all pension plans, profit-sharing plans and all employer stock bonus plans must each be treated as one plan.

· is payable on account of the participant's attainment of age 59 1/2, death, disability, or separation of service.

Lump-sum distributions are frequently rolled over as a tax-free distribution from one qualified plan into another, continuing tax deferral.

INPORTANT! For more concise information and help in determining your best course of action, please consult with your tax advisor.