While most people still are putting money into individual retirement accounts, some retirees are starting to take theirs out. And the good news is that Congress recently relaxed the rules on IRA withdrawals.

Retirees who need their IRA money to live on are unaffected. But those with enough income from other sources can now shelter their IRA savings from taxes longer, thereby leaving more to their heirs.

Any IRA withdrawal is taxed as ordinary income. Any money left in the IRA at your death is taxed as part of your estate (that is, if you're worth enough money to owe estate taxes). Beyond this, how much you pay in taxes depends on how you handle the funds.

There is no law against taking money out of your IRA any time you want. But any withdrawals before age 59 1/2 will cost you a 10 percent federal penalty. (Exception: No penalty is charged if you become disabled, or if you die and your IRA funds are withdrawn by heirs.)

Between ages 59 1/2 and 70 1/2, you can take as much or as little IRA money as you like with no tax penalty. If you have enough other income, there is no need to withdraw one penny from your IRA shelter. You're better off leaving it alone to build up tax-deferred income.

The only limits on your freedom to control this money would be those contained in the agreements you signed when opening up your IRA accounts. For example, you might have entered into a contractual payout agreement with an insurance company, starting at age 70. Or you might have bought a five-year certificate of deposit that can't be disturbed in advance without paying an interest-rate penalty.

But these kinds of limits are self-imposed. Nothing in federal law requires any penalties or payout schedules earlier than age 70 1/2.

Starting at about that age, however, you must withdraw (and pay taxes on) a minimum amount of IRA money every year. If you don't, there's a 50 percent penalty on the money you should have withdrawn but didn't. Payouts have to start by April 1 of the year after you reach 70 1/2.

Here's where the new rules come in. You are now allowed to withdraw smaller amounts than the old law required. That means more money left in your IRA to build up tax-deferred; a guarantee that you'll never outlive your IRA funds, and the certainty that some of the money can be left for your heirs.

I won't mention the old rules because they're dead.

Under the current rules, you first calculate your life expectancy at age 70 1/2 (or the joint life expectancies of you and your spouse, if your spouse is the beneficiary of the IRA). Your minimum withdrawal is based on the assumption that your IRA funds will be paid out evenly over the rest of your life.

Here's the new part: Each subsequent year, you can now recalculate your life expectancy (or joint life expectancies) and restructure your withdrawals accordingly. This continually lengthens the period of time that statistics say you are likely to live -- which allows you to stretch out your IRA withdrawals. Another result is that you will always have some money left in the IRA shelter at death.

The IRS hasn't yet issued detailed regulations on how all this is supposed to work. But Wesley Howard, editor of the IRA Reporter, advises retirees to use the new method. "I've been told by my contacts at the Treasury Department that the regulations will give relief to anyone who has decided on a distribution computation based on a reasonable interpretation of the new law," he told my associate, Virginia Wilson.

If you started withdrawals under the old method, you can switch to the new one, unless you signed a payout agreement that prevents any change. The bank, insurer or brokerage house handling your IRA should be able to advise you on how to do this. (If it hasn't yet caught up with the new law, talk to an accountant.)

If a child is your IRA's beneficiary, you can now calculate withdrawals based on the combined life expectancies of yourself and the child. That might cut your payout even more, leaving larger amounts of money tax-deferred. (In this case, the child's life expectancy is calculated only once; it cannot be lengthened in future years.)

But there are limits on naming very young children or grandchildren as beneficiaries in order to reduce your IRA withdrawals, warns William Nick of Coopers & Lybrand. A bill now before Congress would require you to withdraw at least 50 percent of your normal distribution every year if the beneficiary is someone other than your spouse. This provision is likely to pass and be retroactive.

Large IRA holders shouldn't rely on banks or brokers for guidance on these matters. Talk to an estate-planning lawyer instead.