Withdrawals in Retirement
Managing your retirement income
Before you begin taking withdrawals 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 withdrawals. Withdrawals from pre-tax contributions are fully taxable at ordinary income tax rates, while qualified distributions from Roth contributions are tax-free. And retired clergy may be able to apply some or all of your housing costs against your pre-tax withdrawals from your RPB account for an additional tax benefit.
Participants who have multiple retirement accounts (i.e., taxable, tax-deferred, and tax-free accounts) should consult with a tax advisor about 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 withdrawal rules specific to this type of account that you’ll want to take into consideration in your withdrawal planning.
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 it’s best to 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 also want to 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 this retirement planning calculator to get started.
The IRS requires that you start taking distributions from your retirement accounts when you reach 73* and are no longer working in the Reform movement. You’ll want to make sure your annual withdrawals satisfy the required distribution amount.
* The SECURE 2.0 Act of 2022, raised the RMD age from 72 to 73 for plan participants who turned 72 on or after January 1, 2023.
If you’re unsure if 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.
403(b) 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 73—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. | Same2 |
Disabled | 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. |
Death | 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. Spouses must begin taking RMDs when the original account owner turns 73. | 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. Spouses must begin taking RMDs when the original account owner turns 73. |
- 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.
- As long as the Roth money is held in the 403(b), an RMD will be required. However, if the Roth balance is rolled over into a Roth IRA, no RMD is required to be taken from Roth IRAs.
RPB withdrawal options
Once you’re ready to request a withdrawal, you can choose one or more of our 403(b) withdrawal options based on your personal financial situation. We recommend that you consult with your financial advisor or tax consultant before finalizing your withdrawal plan.
Systematic Withdrawals are like receiving a regular paycheck. You can customize your recurring withdrawals to fit your unique financial situation:
- Frequency. Choose monthly, quarterly, semi-annual, or annual payments.
- Amount. Take a specific dollar amount or specify a period of years over which you want the money to be distributed.
- Payment date. Choose the date of the month that you want the money deposited.
- Funds. The money is withdrawn proportionally from the investments in your RPB account. Call Fidelity to withdraw the money from specific funds.
- Delivery method. Your withdrawal proceeds can be directly deposited into your bank account or sent to you by paper check.
To establish, change, or request special processing for a systematic withdrawal, contact Fidelity at 1.800.343.0860.
RMD Systematic Withdrawals are recurring monthly or quarterly withdrawals that are calculated to satisfy your annual Required Minimum Distribution.
It's an easy way to satisfy your RMD because every January, Fidelity automatically readjusts the recurring withdrawal amount to satisfy that year's RMD.
Note: Because this option is automatically calculated based on your annual RMD, you can't change the amount of RMD Systematic Withdrawals. But if you need extra cash during the year, you can request a single withdrawal by calling Fidelity or on NetBenefits.
You have the option to withdraw some or all of your money and have it sent directly to you or to roll over some or all of the money to another qualified retirement account. Keep in mind that direct payments are subject to taxation, whereas rollovers are not. Rollover withdrawals are only allowed from 403(b) accounts, not from Rabbi Trust accounts.
To request a one-time withdrawal, log in to NetBenefits and select ‘Loans/Withdrawals' from the Quick Links menu to start the process. If you want your money deposited directly in your bank account, make sure to enter or update your bank information in NetBenefits at least 10 business days prior to requesting the withdrawal.
Rabbi Trust distributions have a specific distribution schedule based on the option you select.
You can purchase an annuity through MetLife with all or some of the money in your RPB 403(b). The MetLife Annuity will provide you with fixed payments for life at group rates; clergy can also apply their parsonage tax exclusion to annuity payments. Contact us to learn more.
Withdrawal Order
The savings in your retirement account may appear to be a single bucket of money but each dollar is associated with where it came from—also called the "contribution source" of the money. The source may be a deduction from your paycheck, a contribution from your employer, or a rollover from another eligible retirement plan.
The source is important because RPB uses it to determine the “order” in which the money is taken from your account when you request a withdrawal. This order is designed to help you minimize taxes and maximize growth.
For example, since Roth contributions and their earnings are tax-free for qualified distributions, it may be beneficial to wait to withdraw Roth money so that your contributions and their earnings can continue to grow.
Refer to the chart below to see the order in which money is withdrawn from your account based on the contribution source.
| Withdrawal Order | Contribution Source | Pre-tax Money | Post-tax Money | Eligible for Parsonage Exclusion |
|---|---|---|---|---|
1 | Combined contributions3 | X
| X
| |
2 | Employer contributions | X
| X
| |
3 | Employee contributions | X
| X
| |
4 | 403(b) Rollover contributions (Parsonage Eligible)4 | X
| X
| |
5 | 403(b) Rollover contributions5 | X
| TBD
| |
6 | Employee Roth contributions | X
| ||
7 | 403(b) Roth rollover contributions | X
|
- Prior to January 1, 2018, RPB’s recordkeeping services provider did not track employer and employee contributions separately
- For clergy, this source is for parsonage eligible rollovers made beginning April 2020.
- For clergy, this source may include both parsonage and non-parsonage eligible money. Before April 2020, RPB could not distinguish between parsonage-eligible and non-parsonage-eligible rollovers. Please contact RPB if you have any questions.
If you want to take out your money in a different order, you must contact Fidelity customer service. We suggest you consult with your tax advisor before taking withdrawals for your retirement income.
To view how much money you have in each source, log in to Fidelity NetBenefits, click “Summary” and then click “Balances.” Then, in the “Your Investments” section, click “Show Details” under the “Sources” column
Required distributions in retirement.
After you reach age 73, the IRS requires you to start taking a minimum distribution amount from your account each year.