A tax break you may not want to take.

It isn't every day Congress hands taxpayers a tax break they may not want to take, but such is the case with the temporary suspension of the 15% tax on excess distributions from retirement accounts. Before 1997, individual taxpayers who withdrew more than $155,000 in a single year or $775,000 in a lump sum (these numbers are indexed annually) from a retirement plan such as a 401(k) or an individual retirement plan paid a 15% penalty on the excess above those limits. The tax was in addition to regular income taxes paid on the withdrawals, so the combination made for a hefty tax bill. Most taxpayers, of course, either don't have that much money in their accounts or can spread out the withdrawals over the years to avoid the tax. However, taxpayers generally are required to withdraw at least a minimum amount annually once they reach the age of 70 1/2. For retirees with large nest eggs, their minimum withdrawals could exceed the $155,000 limit.

Congress has suspended the 15% excise tax on all withdrawals made in 1997, 1998, and 1999, though. So, if you are fortunate enough to have so much money in your retirement accounts that even spreading out withdrawals over many years won't keep you below the limits, you may be tempted to make sizable withdrawals during these years to avoid the tax. Congress has made that temptation even stronger by eliminating by the year 2000 the ability to elect five-year averaging, a method that can reduce the tax bite...