This section provides answers to participant questions about how lifetime income payments are treated for tax purposes.
If you’re required to take required minimum distributions (RMD), each full year of lifetime income payments will automatically satisfy this requirement in regard to the portion of your account applied to this benefit. Payments in the year you start to receive lifetime income will count toward satisfying the calculated RMD for that year.
Although we can’t provide tax or financial advice, the following guidance may be helpful. We encourage you to speak with your personal tax advisor.
The income you receive under a lifetime income election purchased with pretax contributions is generally fully taxable as ordinary income. However, if you have made after-tax contributions to the plan, all or part of your lifetime income may be tax free. The tax-free portion depends on how much you have contributed and the structure of the lifetime income.
The income you receive under a lifetime income election, purchased exclusively with post-tax contributions in a designated Roth (401(k)) account, can be excluded from your income for tax purposes if you satisfy the requirements for a qualified Roth distribution. Generally, this requires you to have participated in the Roth account for five taxable years, and to be at least age 59½ when income begins. Special rules apply in cases of distributions on account of death, disability, first-time home purchase (up to $10,000) or of amounts transferred from non-Roth accounts.
In general, yes, for payments within the United States. However, if you do not make an available election to withhold, federal income tax will be withheld from lifetime income as if you were married, claiming three withholding allowances. Your state may also require its income tax be withheld. Special withholding rules apply to payments made overseas or to non-resident alien individuals.
Yes. TIAA can provide a Verification of Annuity letter upon request. This letter details your recurring payments from the TIAA Secure Income Account.