The Washington area has a pretty large population of credit union members, so a recent decision to remove all interest rate controls should be welcome news here.

The deregulation rule, issued by the National Credit Union Administration--the industry's federal watchdog--removes interest rate ceilings from share certificates as well as share passbook and checking accounts at all federally chartered credit unions.

(There are now more than 12,000 federal credit unions with around 27 million members. Some 9,000 state chartered credit unions are not governed by the National Credit Union Administration.)

Joseph N. Cugini, chairman of the Credit Union National Association (the largest CU trade group) warns depositors not to expect immediate increases in interest rates. Credit union managers are expected to move slowly and with caution in this new environment.

But it appears that credit unions may soon look more attractive than ever for conservative savers. (Shares at federal credit unions are insured for up to $100,000 by the National Credit Union Share Insurance Fund.) Congress has set 1986 as the year for decontrol of savings account interest at banks and S&Ls.

Question: My wife and I plan on retiring in about 12 years, with combined annuities expected to be around $30,000. We both have Individual Retirement Accounts, which may be worth $100,000 at retirement. If we then withdraw $10,000 a year, it will put us in a higher tax bracket. Can we invest in tax-exempt bonds 12 years from now, or should we invest now to bring us long-term capital gains?

Answer: Unfortunately, from a tax point of view, neither strategy will work. Withdrawals from an IRA are taxable as ordinary income regardless of the source.

That is, even if you convert your IRA holdings to tax-exempt bonds or to an investment which would generate capital gains, the funds will lose their identity in the IRA and will be subject to ordinary income tax when withdrawn.

Keep in mind that each year you made an IRA deposit the annual total was subtracted from ordinary income on your tax return. So it seems only fair that the amounts withdrawn after retirement should be added to ordinary income.

For this reason investments that generate tax-exempt income or long-term capital gains are generally considered to be more suitable outside the IRA structure, to avoid losing their tax-favored treatment.

However, an investment that holds promise of a greater long-term return--even in the form of capital gains--may make sense for an IRA anyway. Tax treatment should not normally be the major factor in measuring the suitability of an investment.

Q: What option would you suggest with my Keogh plan at age 70 1/2--annuity or lump-sum withdrawal? Why? May I continue to maintain the plan by withdrawing either a percentage of the funds consistent with my life expectancy or the total accumulation, and contributing annually based on current earnings? If not, can an IRA be used as an alternative?

A: Let's answer the easier part of your question first. Starting with the year in which you reach age 70 1/2 you may no longer make contributions to either a Keogh or IRA for tax credit. Contributions must cease and withdrawals must start in that year.

There is no blanket answer to your first question. The choice depends on several factors, like your present and projected tax brackets, family circumstances, other retirement income and your plans for the coming years.

Unlike an IRA, a lump-sum distribution from a Keogh account may qualify for the special 10-year averaging method of figuring the tax due on the payout. (One of the requirements is a minimum of five years participation in the plan.)

So withdrawal of the entire amount in your Keogh account in one year might make sense if you have a significant amount of other taxable income after retirement.

You would pay a one-time tax, but using 10-year averaging that tax would be at a lower rate than your normal tax bracket. Then the balance of the principal would be yours without further tax consequences (except of course for any taxable income generated by investment of that balance).