This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor's personal advisor based on the investor's own objectives and circumstances.
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All FAQs about transactions & taxes
If we need to report a distribution, we send a form to you, the IRS and state tax authorities. Federal law requires TIAA to report information about distributions from pensions, annuities, and IRAs, to you, the IRS, and state tax authorities wherever applicable.
That means if you had a distribution or reportable event, you will receive a copy of the related form that details your transaction(s).
Note: For SEP IRA accounts, we'll report the contributions for the tax year in which they were received. If you are crediting the contributions to another year, it will be up to you to maintain those records.
The short answer: It's complicated. The long answer depends on the source of income.
Your employer-sponsored retirement plan
Pre tax contributions withdrawn from a tax-deferred retirement plan are taxed as ordinary income. Any "after-tax funds" in the account are returned to you tax free; however, the earnings from these after-tax contributions are still taxable.
Some retirement plans allow for Roth contributions. If Roth contributions are made to the retirement plan, the contributions have already been taxed and the earnings can be withdrawn tax free depending on certain conditions. The date of the distribution needs to have occurred at least 5 years after the beginning of the year in which the first Roth contribution was made (or its predecessor in the case of a rollover), and the participant is either (1) age 59½ or older or (2) considered disabled. For certain withdrawals considered under the Internal Revenue Code to be rollover eligible, we are required to withhold 20% of the taxable amount withdrawn as a prepayment of taxes.
Additionally, withdrawals from employer-sponsored plans taken before you obtain age 59½ may be subject to a 10% early withdrawal penalty (unless certain conditions are met).*
Your Individual Retirement Account (IRA)
Withdrawals from Traditional and SEP IRAs are generally taxed as ordinary income. However, if you have funded your IRA with non-deductible contributions, the non-deductible contribution portion of your IRA is not taxable upon withdrawal (earnings on the non-deductible contributions will still be subject to ordinary income tax). Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty unless certain conditions are met.*
Withdrawals from Roth IRAs are tax free provided the date of the distribution occurs at least 5 years after the beginning of the year in which the first Roth contribution was made (or its predecessor in the case of a rollover) and the participant is either (1) age 59½ or older or (2) considered disabled. Prior to meeting these requirements, any earnings withdrawn are taxable as ordinary income and may be subject to the early withdrawal penalty.
For lifetime annuity payments, fixed period annuity payments (set up for more than 10 years), and Minimum Distribution Option payments, there are no withholding requirements. This means you can either designate a flat dollar amount, a fixed percentage you want withheld, or opt to have no withholding from these types of distributions. If you do not make an election, we are required by the IRS to withhold 10% of your payments.
* An early withdrawal penalty does not apply if you meet one of the following conditions:
- It's part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary.
- You leave the sponsoring employer at age 55 or older.
- You have unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.
- You are disabled as prescribed by IRS Regulations.
- The withdrawal is made by your beneficiary after your death.
- The withdrawal is made from an account issued through a Qualified Domestic Relations Order.
- The withdrawal is made for up to $10,000 to pay for first-time homebuyer expenses (IRA Only).
That depends on a number of factors including the type of account, whether or not your contributions have been deducted previously, and the timing of your withdrawals. Call us at 800-842-2252 for more information.
The tax information contained above is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. TIAA-CREF or its affiliates do not provide tax advice. Please consult your tax advisor.