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The Lump Sum [ Retirement Planning]

You're there. The magic day has arrived. The desk has been cleared, all personal mementos have been carted home, and you have received the proverbial gold watch. All that's left is to get with Catbert, the Evil Personnel Director, to tie up some remaining loose ends, and then you're out the door forever. Goodbye, drudgery! Aloha, Mai Tais. (No, we don't mean to paint quite such a disturbing picture of the Hades of job hatred followed by the Nirvana of fruity alcohol, but what the heck.) Here you come! Congratulations, Fool. You're about to grab the brass ring!

Catbert smiles sardonically as you enter his office and says, "We just need you to fill out a few forms, Josh, and you'll be on your way. Tell us how you want to take your money, sign this irrevocable option form, and you're outta here. You've got to make the choice on your own, though. I can't advise you at all. You know why: liability issues, fiduciary responsibilities, lawyers, etc. But you're a bright guy. After all, you managed to last a whole career here, didn't you? You'll figure it out. Just tell me how you want to handle your distribution in the next five minutes, though, okay? I'm a busy guy and can't spend all day chewing the fat with ex-employees."

Making that choice is a piece of cake isn't it, Josh? Just grab the money and run, right? It isn't often that you see six-or-seven figure sums staring you in the face, and it's all yours, Fool. Snatch that check, deposit it in your bank, and board that cruise liner to luxury land. You can work out the nitty-gritty with your tax advisor at the end of the year. Right now your better half is waiting with luggage in hand and the camera slung over her shoulder. Get a move on, guy, 'cause time's a-wasting!

Uh, Josh? Don't be too hasty, or you may be in for a very rude awakening. This choice is a one-time decision. Go the wrong way now, and you could very well lose about half of the money you've accumulated through your working career. The taxman would steal it away while you weren't looking. This decision is not one that can be ignored or left to the last minute. You must know all of your options, and you must know the tax impact of each choice. Without that knowledge, it's too easy to make a mistake that could haunt you for the rest of your life.

For most of us, the sums that become available at retirement are the largest amounts of money that we will control in our entire lives. The decision on how we handle that mone