Distribution

This is payments periodically made for interest or dividends.

An example of this is when you retire, you may wish the option of taking the value of your pension, salary reduction, or profit-sharing plan in different ways.

You might choose to take your money in a series of regular lifetime payments, generally described as an annuity, or you go for all at once, in what is known as a lump-sum distribution.

If you take the lump sum from a certain benefit pension plan, the employer follows specific regulatory rules to calculate how much you would have received over your estimated lifespan if you'd taken the pension as an annuity. The the employer subtracts the amount the fund estimates it would have earned in interest on that amount during the payout period.

If you choose to take a lump-sum distribution from a defined contribution plan, such as a profit sharing plan or salary reduction then you receive the amount that has accumulated in the plan.

When you change jobs you may not have the option to take a lump-sum distribution from these plans.

This type of decision is best made with the counsel of your accountant and a financial services person who can help you consider all the options. You want to choose the path that is best in the long run for your financial needs now and in the future.