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LIFECYCLESERIES
CAN MY PENSION BE TAKEN OUT AS ONE LUMP-SUM PAYMENT?
If you withdraw the full amount in your pension account, part or all will be taxable in the year received. You may
want to consider rolling it over into another pension plan or a traditional IRA to avoid paying a large amount of tax
in one year.
NOTE: Before withdrawing any funds from a retirement account (IRA, 401-K, Thrift Savings, etc.), consult with a tax professional to
understand potential tax consequences.
WHEN AM I REQUIRED TO WITHDRAW MONEY FROM MY RETIREMENT
ACCOUNTS?
Your required minimum distribution (RMD) is the minimum amount you must withdraw from your account each
year. You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan
account when you reach age 72 (70 ½ if you reach 70 ½ before January 1, 2020). However, the first payment
can be delayed until April 1 of 2020 if you turn 70½ in 2019. If you reach 70½ in 2020, you have to take your first
RMD by April 1 of the year after you reach the age of 72. For all subsequent years, including the year in which
you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.
Roth IRAs do not require withdrawals until after the death of the owner.
For additional information see Publication 575, Pension & Annuity Income and Publication 590-B,
Distributions for Individual Retirement Arrangements (IRAs).
NOTE: The RMD rule is waived for tax year 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
HOW DO I DETERMINE HOW MUCH OF MY SOCIAL SECURITY IS TAXABLE?
Compare the base amount found in Publication 915, Social Security and Equivalent Railroad Retirement
Benefits, to the total of one-half of your social security benefits plus all of your other income (including tax-
exempt income). If the base amount exceeds your income computation, then your social security is non-taxable.
For the most complete calculation, you should use the worksheets found in Publication 915 or the instruction
books for the 1040 series.
I AM RETIRED AND RECEIVE SOCIAL SECURITY, BUT I HAVE NOW TAKEN
A PART TIME JOB. WHY ARE THEY TAKING SOCIAL SECURITY TAXES OUT
OF MY PAY?
The Federal Insurance Contribution Act, or FICA, provides for a Federal System of old-age, survivors, disability,
and hospital insurance. The old-age, survivors, and disability insurance part is financed by the social security
tax. Generally, employee wages are subject to social security and Medicare taxes regardless of the employee’s
age or whether he or she is receiving social security benefits.
WILL TAXES BE WITHHELD FROM MY INCOME OR WILL I HAVE TO MAKE
ESTIMATED TAX PAMENTS?
Our tax law provides for a pay-as-you-go system which requires taxes to be paid on income as it is received.
There are two ways which taxes are typically paid:
Tax Withholding – You can request federal tax be withheld from your pension, social security, unemployment
compensation, etc., by submitting the appropriate following form to the payer of the income:
y Form W-4, Employee's Withholding Certificate - Used for wages and military retirement pay
y Form W-4P, Withholding Certificate for Pension or Annuity Payments - Used for pensions and annuities
y Form W-4V, Voluntary Withholding Request - Used for social security, unemployment compensation, and
railroad retirement income
To ensure you do not have too much or too little income tax withheld use the Tax Withholding Estimator. You
may use the results of this program to complete the appropriate withholding form.
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