There are various distribution methods for accounts with cash balances at retirement. The following is a list of the methods and brief descriptions. Note that all payout methods (except 'Annuitize') may be subject to RMD, which may affect the goal of the selected method.
Annuitize: This annuitizes the account over the life expectancy of the owner. The value entered is the payout in dollars per thousand per month.
Use Funds as Needed: Funds are distributed as needed.
The following distribution methods are categorized as restrictive distribution methods. This means that funds are not available for distribution if the restrictions on distribution have already been met.
| For Example: | If the distribution method is Retain Principal, the distributions are limited to reducing the cash balance of the account to the value it was at retirement. In the Gap Analysis calculator's Setup tab, this may be configured to allow distributions from an account as a last priority in the Restricted Distribution dialog box. |
Retain Principal: This limits distributions to the interest earned .
Amortize, no inflation: Equal payments are made over retirement years. The payment is calculated so that at life expectancy the account will be depleted.
Amortize, with inflation: Equal payments over retirement that are annual adjusted by inflation. The payment is calculated so that at life expectancy the account will be depleted.
Percent of Account: Allows for a specific percent of the account balance to be paid out each year during retirement. If the need is less than the calculated annual distribution, the distributions may be less than the specified percentage.
RMD Only: Only Required Minimum Distributions are made from the account. Note that these are made on the last payment of the calendar year.
Dollar Value, No Inflation: A specified dollar distribution per month over retirement. No adjustments are made to the distribution.
Dollar Value with Inflation: A specified dollar distribution per month over retirement with annual inflation adjustments made to the distribution.
TSP Life Annuity: This option is available when working with the TSP Plan (or Federal Summary Account) in the Gap Analysis calculator. An additional prompt will be displayed to select which TSP annuity.
Summary of Retirement Payout Methods
Payout Method |
Has Cash Balance |
Restricted Distributions |
Annuitize |
¨ |
N/A |
Use Funds as Needed |
þ |
¨ |
Retain Principal |
þ |
þ |
Amortize No inflation |
þ |
þ |
Amortize with inflation |
þ |
þ |
Percent of Account |
þ |
þ |
RMD Only |
þ |
þ |
Dollar Value, No Inflation |
þ |
þ |
Dollar Value with Inflation |
þ |
þ |
TSP Annuity |
¨ |
þ |
Note: Selected distribution methods can be hidden from the list in the File/Config/Gap Analysis/Calculator.
