Distributions in Retirement
Managing your retirement income
Before you begin taking distributions from your retirement savings, we recommend you create a withdrawal plan to ensure you have the income you’ll need throughout your retirement. RPB is here to help you get you started.
It’s important to consider your tax liability—which differs based on the type of RPB contributions you’ve made—when planning for retirement distributions. Distributions from pre-tax contributions are fully taxable at ordinary income tax rates, while qualified distributions from Roth contributions are tax-free.
Participants who have multiple accounts for retirement (i.e., taxable, tax-deferred, and tax-free accounts) should consult with a tax advisor about the possibility of creating tax-efficient withdrawal strategies. You’ll want to target income levels that will least affect your marginal tax rate and taxation of social security benefits.
If you also have money in RPB’s Rabbi Trust, there are distribution rules specific to this type of account that you’ll want to take into consideration in your withdrawal planning.
It can help to work with a tax advisor when making these decisions. If you don't already have someone, consider using LifeWorks to find the right person to help.
Withdrawal planning considerations
Starting at age 59½, you can take penalty-free distributions even if you’re still working. Here are some general guidelines to help you get started with your retirement planning. But keep in mind that you should create a customized withdrawal plan for your unique situation and periodically reevaluate your strategy to ensure you satisfy your required minimum distributions, minimize your tax burden, and account for any other life changes.
Consider all of your retirement income sources when determining how much money you have to work with in retirement. You’ll also be spending differently in retirement—more on some things and less on others—so your annual expenses might be different from when you were working. A common rule of thumb is that you’ll need to replace between 60% – 90% of your annual pre-retirement paycheck for each year you’ll be retired.
You should also consider how much you can safely withdraw each year. This figure depends on a few factors, including the savings you’ve accumulated in all your investment accounts, market returns, your retirement lifestyle and your life expectancy. One way to calculate how much you’ll need is to plan to withdraw 4% of your retirement savings the first year you retire, then increase that amount by 2% each year after that to account for inflation.
You can use our retirement planning calculator to get started.
The IRS requires that you start taking distributions from your retirement accounts when you reach 70½ and are no longer working. You’ll want to make sure your annual withdrawals satisfy the required distribution amount.
If you don’t think you’ll have enough savings to last through retirement, there are steps you can take. Start by reducing your projected retirement expenses where possible.
You can also explore working longer, perhaps even into retirement, or contributing more to your retirement plan before retirement. Our research shows that increasing contributions has a greater impact the earlier you do it and—for those nearing retirement—working longer will help stretch your nest egg. Finally, make sure you review all of your retirement income sources and your retirement budget with a financial advisor.
Withdrawal rules and taxes
|Pre-tax 403(b) Assets||Roth 403(b) Assets|
Under Age 59½
Must no longer work for an RPB-eligible employer. 1
Must no longer work for an RPB-eligible employer. 1
Age 59½ or older
Starting at age 59½, you can take penalty-free distributions even if you’re still working. Withdrawals are subject to income tax.
Starting at age 59½, you can take penalty-free distributions even if you’re still working. Withdrawals are tax free if the account has been held for at least 5 years.
Required Minimum Distributions
The IRS requires that you start taking minimum distributions when you reach age 70½—by no later than April 1 of the following year—unless you’re still working for a RPB-eligible employer and decide to defer your RMD. RPB will calculate and distribute your RMDs for you.
Distributions can be taken without penalty if the disability is total and permanent as defined by the IRS.
Distributions can be taken without penalty if the account has been held for at least 5 years.
In the event of the account owner’s death, the funds are moved into a beneficiary account, and spouses have the same rights as participants. Non-spouse beneficiaries must withdraw the account balance within 5 years or roll it over into an inherited IRA.
In the event of the account owner’s death, the funds are moved into a beneficiary account, and spouses have the same rights as participants. Non-spouse beneficiaries must withdraw the account balance within 5 years or roll it over into an inherited IRA. There are no income taxes or IRS penalty if the account was held by the decedent for 5 years.
- Early distributions to a qualified retirement plan while actively employed by an eligible employer may be made on a case-by-case basis. Please refer to our Plan Narrative for more information.
RPB distribution options
Once you’re ready to request a distribution, you can choose one or more of our 403(b) distribution options based on your personal financial situation. We recommend that you consult with your financial advisor or tax consultant before finalizing your withdrawal plan.
A monthly paycheck will be deposited directly into your account. You can select the specific funds that the distributions will come from, or you can simply take money proportionally from all your funds. You have the option to change the distribution amount or tax withholding up to four times per year. Download form.
You have the option to take a partial or full withdrawal of your funds and have the money sent directly to you or you can roll over some or all of the distribution to another qualified retirement account. You can take a lump sum distribution once every 12 months. Lump sum distributions are only allowed from your 403(b) accounts, not from the Rabbi Trust. Please read the Special Tax Notice on lump sum distributions, and contact us to request a lump sum distribution.
You can purchase an annuity through MetLife with all or some of your funds. This allows you to receive fixed payments for life at group rates; clergy can also use their parsonage tax exclusion. Contact us to learn more.
Required distributions in retirement.
After you reach age 70½, the IRS requires you to start taking a minimum distribution amount from your account each year.