First, a few definitions and explanations. Distributions from retirement and annuity plans can be made in several ways, depending on the terms of the plan. The typical types of distribution choices are:

• Annuities — usually paid under a contract, this alternative makes regular distributions, generally in equal monthly amounts based on the life expectancy of the beneficiary.
• Installments — this alternative can offer a variety of payout periods and equal or unequal payments.
• Lump sum — this form of payout distributes the entire vested balance in one payment. It can be made in cash, in securities, or both.

Common types of annuities are:

• Fixed period — distributions are made at regular intervals and have a predetermined amount and period of duration.
• Single life — distributions are made at regular intervals, but payouts end at the beneficiary's date of death.
• Joint and survivor — the first annuitant receives a predetermined amount at regular intervals for life. After his or her death, the survivor receives a predetermined amount at regular intervals for life, which can be the same as, or different from, the original amount
• Variable — distributions may fluctuate as a function of profits or economic indices, but the payout period is either fixed in duration or set only for the recipient's life. Employer-provided plans generally do not permit variable distributions, but some annuities purchased through insurance companies may.

Generally, installment payments distributed by any of these types of plans are taxable in the year they are received.

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