An annual withdrawal plan means you calculate and withdraw your RMD in one lump sum each year.

Your RMD is calculated based on the value of your retirement accounts as of December 31 the year before and using the Uniform Lifetime Table that the IRS releases for each year's tax filings.

Many taxpayers who choose to make annual withdrawals do so either at the beginning or end of each tax year and is a personal preference since you can withdraw this money at any time during the calendar year.

However, in the first year you qualify for a RMD, you must begin making withdrawals by April 1. For all years afterward, the IRS has no deadline other than the end of the year.

Whenever you choose to withdraw your RMD, there are pros and cons to the annual approach.

Immediate resolution of your RMD tax obligations: By withdrawing annual RMDs all at once, you potentially complete your tax obligation. This assumes you have taxes withheld from your distribution and of the right amount.

Reinvestment opportunities: If you have other strong investments (excluding tax-advantaged accounts), you could potentially invest your RMD in those opportunities earlier, with more time for potential growth.

Potentially more growth: Since this is a tax-advantaged account, the sooner you withdraw this money, the sooner you pay taxes on it. By contrast, the longer you leave it alone, the longer it can grow tax-deferred. Withdrawing at the end of the year could mean more potential growth in your retirement account before taking an RMD.

Potentially higher estimated taxes: If you pay taxes quarterly, you can potentially increase your estimated taxes by taking an early minimum distribution.

Cash flow disruption: Some may need the structure of a regular income for their financial planning purposes, which a lump sum withdrawal can disrupt.

Potentially forgetting: If you wait until the end of the year to make your RMD, there's a chance you'll forget to do so altogether.

Risk of spending tax-allocated funds: When you withdraw from your retirement account, you must pay taxes on the account's profits, as well as the principal. If you take your RMD early in the year, there's a risk that you could potentially spend the portion of money you will later need to pay taxes. (Although you can set some retirement accounts to automatically withhold taxes on your behalf.)

The other common approach to RMDs is taking this money either every month or quarter. As with annual distributions, it's probably a good idea to speak with a financial advisor to see which method could potentially make the most sense for your retirement plan. You can make distributions as frequently as your portfolio allows. However, monthly is the most common approach.

Cash flow management: Making monthly withdrawals allows you to treat this as regular income. Many retirees may prefer this style of cash flow over a lump sum, as it helps with personal finance and budgeting.

Estimated taxes: If you pay quarterly taxes based on other income, having your RMD arrive in regular segments could help simplify estimated taxes.

Tax payments: If you make monthly withdrawals, it could be easier to have your portfolio manager automatically deduct any applicable income taxes so you don't have to worry about setting the money aside.

Reduced growth: The longer you leave your money in place, the more potential it has to grow. If you take your withdrawals over the course of the year, your portfolio could potentially lose some opportunities for growth based on reduced capital.

Potential for miscalculation: While less of a concern if you work with a financial advisor (click here to get matched with up to three for free), if you withdraw your money in stages (rather than one lump sum), there can be more opportunity for miscalculations.