The amount that can be contributed in pre-tax dollars to retirement plans and tax-deferred annuities combined is limited both by an overall maximum (currently $40,000 or 100 percent of total compensation, whichever is less) and by your client's own income. TIAA-CREF can calculate your client's own general limit on pre-tax contributions.

Even if an employer's retirement plan allows cash withdrawals, your clients can't take distributions before age 59½ as long as they're still working for that employer. Those who leave their employer and take distributions before 55 will be subject to an additional 10 percent tax penalty in addition to regular income taxes.

Most people in 403(b) retirement and TDA plans must start receiving minimum distributions by the April 1st following the year they turn 70½ or retire, whichever is later. However, 403(b) funds accumulated prior to 1987 aren't subject to mandatory federal minimum distribution rules.

Basic Taxation Rules
Payments and withdrawals are fully taxable if derived solely from:
Contributions made by employers, unless your client was required to include them in his/her taxable income in the year made.

Contributions made through salary reduction pre-tax dollars, whether voluntary or not.

Tax-deferred earnings (earnings in a plan are always fully taxable when withdrawn). Payments based on contributions your clients may have made to qualified plans and 403(b) plans with after-tax dollars -- that is, payments required to be included in taxable income for the year made, as well as salary-deduction contributions -- are not taxed again when withdrawn. To calculate the tax-free portion of employee annuity payments, TIAA-CREF first determines your client's cost basis, also known as "investment in the contract" -- in effect, all after-tax contributions minus any tax-free distributions already taken. We apply the appropriate IRC table to determine what portion will be tax-free. The tables indicate how many months the IRC anticipates that a person of a specific age will receive annuity income over his/her lifetime, based on actuarially calculated life expectancies.

To determine the tax-free portion of joint annuities (i.e., payable over the lives of two people rather than just one) TIAA-CREF uses another table based on the combined ages of the primary and secondary annuitant.

Withholding and Estimated Tax
Withholding from retirement income generally works the same way as salary withholding during employment. The withheld amounts are treated as payments toward the actual tax liability determined by the April 15 after year-end. By filing Form W-4P, the pension counterpart of the W-4 form, your clients can indicate how much they want withheld for taxes over the year ahead.

Retirement income must be reported to the IRS annually and taxes paid by the recipient. The amount of the withholding depends on the type of distribution: retirement benefits paid in the form of lifetime annuity income; a series of substantially equal payments over 10 or more years; or federally required minimum distributions. "Eligible rollover distributions" -- retirement benefits paid in a single sum or over a period of less than 10 years -- are also taxable and subject to mandatory withholding. These include fixed-period annuities of less than 10 years duration, TIAA Interest Payment Retirement Option (IPRO) payments, and cash withdrawals, including our Retirement Transition Benefit (RTB).

Even if retirement payments aren't subject to mandatory withholding, taxes will still be withheld unless your client (or you as an authorized advisor) tells us not to do so. Clients who opt out of withholding will usually be required to pay quarterly estimated taxes directly to the IRS.

Early Distributions
Your clients can begin income from their TIAA-CREF retirement or TDA contracts at any age, without penalty, as long as they've terminated employment and take distributions in the form of lifetime annuity income. Distributions from our tax-deferred annuity product (Supplemental Retirement Annuity) can begin at age 59½ without penalty (or at age 55 if terminated from employment). If your client takes an early (pre-59½) distribution other than as a lifetime annuity (e.g., a lump sum or 10-year guaranteed annuity) he/she may have to pay a 10 percent penalty tax on it.

If an early distribution includes money on which taxes have already been paid, payments attributable to that portion will be tax-free. On the rest, your clients will owe regular income tax and an extra 10 percent, unless:

•	They have left their jobs or separated from service on or after the year when they reach age 55. (This doesn't apply to IRA payments or to after-tax annuities.)
•	They separate from service before age 55 and take the distribution as a lifetime annuity or as a series of payments -- at least one every year -- based on their own life expectancies or the combined life expectancies of themselves and their annuity partner. The payments must be "substantially equal" but can allow for "reasonable" future investment returns. Once begun, payments must continue without change, unless your client becomes disabled or dies, for five years or until he/she reaches age 59½, whichever comes later. At that point he/she can shift to another form of payment if the employer plan permits.
•	They become disabled, as defined by the IRC.
•	They use the distribution to pay tax-deductible medical expenses exceeding seven and one-half percent of their adjusted gross income.

If your client doesn't fall into one of the exception categories, the penalty tax generally applies to all taxable withdrawals unless the money is rolled over.
Note: The penalty does not apply to payments to others on account of a divorce under a qualified domestic-relations order (QDRO), or to survivor benefits at your client's death.

Hardship Withdrawals
Clients with severe financial need may be able to make withdrawals from their accumulation before reaching age 59½ through a hardship distribution. A withdrawal will qualify as a hardship distribution if it meets two criteria. First, the withdrawal must be made to meet an immediate and heavy financial need such as medical expenses; post-secondary education expenses for the client, his/her spouse children or dependents; or preventing foreclosure or eviction. Second, the client must establish that without the withdrawal it will not be possible for the need to be met.

Hardship withdrawals of accumulations attributable to employer retirement plan or TDA contributions are permitted, without distinction as to contributions and earnings. Employee elective deferrals and any earnings credited before 1989 may also be withdrawn for hardship. For funds credited from January 1, 1989 forward, however, only elective deferral amounts may be withdrawn -- earnings are off limits. Hardship withdrawals made before the employee attains age 59½ will be subject both to current-year tax as well as the 10 percent federal early-withdrawal penalty. For that reason among others, clients with pressing financial needs may want to consider taking a loan against a portion of their retirement plan or TDA accumulation in lieu of a hardship withdrawal.

• How Do 403(b) Plans Compare to 401(k)s, IRAs, and Keoghs? • Contributions • IRS Rules and Taxation • Income and Distribution Options • Minimum Distributions		• Overview of Plan Provisions • Vesting • Contracts and Certificates • Rollovers • Minimum Distribution Calculator