A bird nest full of money © David R. Frazier Photolibrary, Inc., Alamy

Your retirement strategy should include a distribution plan. It may seem obvious at first glance, but everyone's strategy for taking out their savings may differ depending on their personality and needs in retirement.

Before starting your distributions, you'll need to make decisions about how you'll use the savings you've accumulated. At what age will you start taking distributions? How much will you need to take out, and how often? What other assets could you use to help make your retirement savings last? How will you invest your account balance? Without careful planning, you could wind up spending the bulk of your retirement savings before you even know it.

Retirement account distributions fall into two main categories: those taken during or after the year an individual turns 59 and a half, which are taken without penalty, and those taken out early, which are usually subject to an IRS penalty and ordinary income tax.

An early, penalized distribution is rarely a wise decision -- whether you're taking a hardship distribution or you've left your job. I highly recommend seeking other means of obtaining money if you're experiencing financial difficulty, starting with budgeting and seeking additional work beyond your primary job. And, if you leave your job, roll over your 401k balance to an IRA or your new employer's plan rather than cashing out.

A more ideal progression for taking distributions at retirement age without penalty can happen in several ways, including:

  •  Leave the money in your former employer's plan and take distributions during retirement. Most plans will allow you to leave your money parked after retirement, but there's often a minimum account balance. You may be able to enroll in a regularly scheduled distribution plan, or you may need to manually request each distribution.
  • Roll over your balance to an IRA upon retirement, and take distributions from the rollover IRA.
  • Roll over part of your balance to an annuity that provides some guarantees. Annuities could make sense as part of a diversified retirement strategy for conservative investors. Fees are higher because of guarantees, so most people should keep some retirement dollars invested in an IRA or employer-sponsored plan.

When you first begin taking distributions, you'll probably want to consider withdrawing regular payments from your savings that are similar to what you earned while working. Many find this an easier transition to manage ongoing bills.

Another way to maximize your retirement savings is to delay taking distributions for as long as you can. Work a little longer so you save a little more and withdraw a little less. Compounding can continue to be your friend through all your investing years.

Though delaying your distributions can be advantageous if you can afford it, everyone has to start taking distributions someday. By the April following the calendar year a retiree turns 70 and a half, and every calendar year thereafter, the retiree must take an IRS-mandated minimum distribution. The requirement is designed to keep people from using a retirement account as a savings vehicle to pass money to heirs.

One note: if you have a Roth IRA, you are not subject to the same required minimum distribution rules. It's a good idea to consult a tax adviser to help you decide how much to withdraw each year.

Don't wait until you have to start taking distributions to create a plan. Just as you've heard about the importance of planning while you're in savings mode, it is equally important to have a plan ready for when it's time to take the money out.

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