Forward Averaging

You’ve finally reached retirement. You’re looking forward to days spent fishing and watching The Price Is Right.

You receive a fairly large lump-sum distribution from a retirement fund. It's so big, you worry about the tax hit. Luckily, you can use forward averaging.

The process treats the lump-sum payment as if it actually took place as a series of distributions stretched out over a series of years.

With the forward averaging, you keep below the higher tax bracket, meaning you can give less of the retirement money over to the government in taxes. More cash for fishing tackle and flights to Burbank, where you can try to get into game show audiences.