Learn about an alternative income strategy.
If you’re no longer working after you reach age 70½ the Internal Revenue Code requires you to take income from your qualified plans and some types of IRAs in the form of what’s called Required Minimum Distributions (RMDs).1
RMDs are designed to ensure that you don’t simply accumulate retirement assets and defer taxation by passing them on to your heirs. But RMDs are not your only choice. There are other ways to take income from your IRAs and qualified plans that meet the IRS RMD requirements and overcome some of the drawbacks of RMDs.
Before you start taking RMDs, consider a few potential drawbacks to that choice:
- If you’re looking for steady, reliable lifetime income, RMDs may not be suitable. The amount of income you get can change each year based on your age and the performance of the underlying investments.
- You have to take an RMD every year, even in down markets.
- The penalty for not taking your full RMD on time is steep: 50% of the amount you should have withdrawn but didn’t.
However, you can meet the IRS requirements and overcome some of the drawbacks in other ways.
One Alternative – Lifetime Income Annuity Payments
An annuity can provide you with income for life. And it may reduce the administrative burden of tracking how much you need to withdraw each year. Any amount you convert to an annuity payment satisfies your RMD and then the amount no longer figures into that calculation after you convert it. An annuity can provide a stream of lifetime income so you don’t need to worry about outliving your money.
You may already have annuity assets available in your TIAA retirement plan or IRA – check with your employer or log-in to your TIAA account to see if you do.