You'll probably spend 20 or more years in retirement. It's important to develop a strategy for your retirement income to make sure it lasts. When managing your retirement income, experts suggest that you withdraw money from any taxable accounts you may have before you access your tax-deferred accounts. This strategy lets your tax-deferred investments continue to grow and postpones the impact of taxes on those investments.

Don't wait until you've depleted your taxable accounts to develop a strategy for your tax-deferred accounts. Consider the following strategies for withdrawing money from your tax-deferred 401(k) or IRA.

Withdraw Money From Your 401(k) Plan

You have options when withdrawing money from an employer-sponsored retirement plan, such as a 401(k). Some of your options may include:

  • Fixed installment payments - if your plan allows it, you can opt for regular payments from your plan account. The balance stays invested in the plan until the account is depleted.
  • Lump sum distribution - this is the most popular option for retirees, according to a survey by the Investment Company Institute, a national association of the U.S. investment company industry. Ninety-two percent of the lump-sum recipients reinvested some or all of the proceeds, and more than four-fifths rolled over some or all of it into a Rollover IRA.

Withdraw Money From Your IRA

Just like a 401(k), you can receive fixed installment payments from your IRA, receive a lump sum or make withdrawals as you need money. You generally can withdraw money as needed without penalty from an IRA after age 59½.

Use Your Social Security Benefits

The majority of today's workers won't be eligible to receive full Social Security benefits until age 67. Many retirees are unaware of the current phased-in increase in the full retirement age from 65 to 67, according to the 2007 Retirement Confidence Survey from the Employee Benefit Research Institute.

If you were born in 1937 or earlier, you were eligible to start receiving full Social Security benefits at age 65. But if you were born after 1937, the qualifying age increases and reaches 67 for those born in 1960 or later - most of today's workers fall into this category.

You can draw on Social Security as early as age 62, but your benefits will be reduced slightly for each month that you begin receiving them before your full retirement age.

If you have enough retirement income through personal savings or retirement plans, you may want to wait to receive Social Security. If you wait, you'll receive larger payments to make up for the years that you didn't receive Social Security, and you'll benefit from receiving higher retirement income payments in your later retirement years.

If you're still working when you begin receiving Social Security, your benefits may be reduced, depending on your salary level and age.

Start Planning Today

Don't wait until you retire to establish a financial plan for your retirement years. Just as you may have done investment planning prior to retirement, creating an investment plan for your assets after retirement can help you achieve the retirement income you need to enjoy the standard of living that you want.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.