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A lump sum distribution from your retirement plan, either because you're retiring or leaving your present job, is likely to be the largest single cash sum you've ever received. How-ever, it need not be overwhelming. Understanding your choices and what they mean can help you have your distribution and use it too.
Don't look at the distribution as a "windfall." It's really one of the three pillars -- Social Security, private savings and your employer's retirement plan -- that you'll need to support you in your retirement.
Unless you plan to spend all of the distribution, you will have to decide where to save or invest it. One factor in deciding should be the amount of time you have to reach your investment goal. The more time you have, the greater the potential of your money to work for you and the better you can tolerate short-term market changes.
Possible objectives can include:
Most people would like to achieve all or at least most of these objectives, but they are not all compatible. Generally, the more you emphasize one of them, the less you can count on achieving one of the others. The return you receive is related to the risk you assume.
When making investment choices, consider how comfortable you are taking risks with your money. Generally money market instruments such as Treasury bills provide the most principal safety and liquidity; bonds the most consistent income and stocks offer the greatest growth.
Finally, be aware that there are significant tax factors involved with lump sum distributions. Be sure to consult with your tax advisor before receiving the payment.
Free Booklet
You can learn more from a free booklet, Receiving a Lump Sum Distribution: A Guide for Investors Aged 50 and Over. For a copy, call 1-800-322-2282, ext. 6892.
Contact the AARP Investment Program from
Scudder, Scudder Investor Services Inc. Distributor for a prospectus containing
more complete information about the Program, its expenses, the roles of
Scudder and AARP and fees they may receive. Please read these materials
carefully before you invest or send money. Scudder Investor Services,
Inc., Underwriter of the nine funds for the AARP Invest-ment Program,
Two International Place, Boston, MA 02115.
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