Any money you take out of your Vanguard account after you retire won’t be counted against your Social Security. The earnings limit is only for work related income – your job or self-employment income. It would be better, in my opinion, to leave it in Vanguard and take it out as it’s needed. Then you won’t have a big tax bill all at once.

No, that is not the way it works.

Depending on the type of plan you have, there may be very strict rules govenerning how the money is paid out to you in retirement.

I would recommend you call a retirement specialist at Vanguard to discuss your specific plan. Vanguard is usually pretty good about giving you the basics in a straightforward manner (without charging you). However, it may be worth it to see if your company offers retirement planners to walk you through the process as well.

In the mean time, let me explain something that you may have missed. The point of retirement accounts is to save up a pile of money that is then paid back to you as a monthly income…in otherwords, a pension that replaces your paycheck.

Good plans are designed to take advantage of special tax breaks and to work with other retirement benefits to maximize your income stream over your entire retired life.

Some plans are “locked in,” meaning you cannot change them and have little or no control over how they pay you. A traditional pension works this way. When you retire you get a choice: lump sum or monthly income of a specific amount…that’s it.

On the other hand, other plans are more flexible, allowing you to control investments and distribution schedules within the guidelines set by the plan, the IRS, or both.

It is absolutely NOT something you should try to “wing” on your own based upon what you think is correct. You need to sit down, study the rules, and come up with a plan…using experts is you run into choices or options you do not fully understand.

Ohhh…. no, no, no…. do not withdraw this all at once. It will all be reported as taxable income in one year, putting you at the highest income tax bracket, and you will lose at least 30% to taxes. Ideally, you want to wait to withdraw this for as long as you can, and then take it out in little bits to stretch it out for the rest of your life. If you are 62 now, you can reasonably expect to live another 25 years or so. So, try to aim to take this out at $800 to $1,000 a month as a supplement to your social security, so that it will last your life.

There is a very good website (www.irahelp.com) that has great advice on retirement plans. Call vanguard, and check it out, before you do anything with this money.

Congratulations on retirement and I hope it is a long, happy, healthy one for you.