How to Crack Into Your Nest Egg

Most employer defined-contribution plans limit your investment choices to just a handful of mutual funds, and often from just one fund company. But by converting your 401(k) plan into an IRA, you will be able to invest in any publicly traded stocks, bonds and mutual funds.

Feeling Charitable

If, like above, you don't need the money in your retirement account right away, you can donate some or all of your RMD to charity without having to give it to the IRS. The advantage here is that while you've met your RMD obligation, it won't be considered taxable income. Unfortunately, this rule applies only to money from your IRAs, not your 401(k) or other benefit plans.

Under IRS regulations, you can give away as much as $100,000 a year from your IRA to a charity. This applies to each account holder, which means a married couple could give up to twice that amount.

However, you must be careful how you donate this money, or you may get burned. If you transfer the funds to a charity, the check must be payable to the recipient. If you happen to withdraw it to your bank account and then write a check in that amount to the charity, the IRS will consider it taxable and there will be no tax advantage for you.

Turn Your RMD Into an Annuity

Another option you have for your RMD is to put it into an annuity. This is more typical for holders of company pension or Keogh plans, and is helpful if you don't need the lump sum but are concerned about outliving your money.

You can choose a single-life annuity or a joint and survivor annuity. The former generally starts at retirement and lasts for the rest of the retiree's life. The latter runs for the combined life of the retiree and his or her spouse while giving a steady income during retirement.