More than 120,000 in-service members and retirees participate in the UFT’s Tax-Deferred Annuity program, making it one of the most popular benefits the union has won for its members.
If you are still working at age 59½ or older, you may make withdrawals from your TDA at any time without penalty.
When you retire, you have three choices for handling your money in your TDA:
- Defer.
- Convert your TDA into a
- monthly annuity.
- Withdraw all the funds.
Most TRS and BERS members elect TDA deferral status, which means leaving the money in your account. Once you retire, you can’t make any further contributions to your TDA, but the money in your account will continue to grow, depending on your investment strategy. You are still permitted, four times a year, to make changes to how your money is invested.
When you defer distribution of your TDA funds, you will avoid paying taxes on those funds — and any resulting investment return — until you withdraw the money. In addition, TDA deferral status lets you delay financial decisions about what you ultimately want to do with the money in your account. You can always annuitize it later, for instance. TDA deferral status also allows you to maintain an existing TDA loan or take out a new TDA loan — subject to certain restrictions.
Members who have vested in the pension system also may elect TDA deferral status if they separate from service through resignation or termination.
When you elect TDA deferral status, you can withdraw funds from your TDA account whenever you want as a direct withdrawal or a direct rollover to an eligible IRA. In most cases, you will maintain TDA deferral status, and all its benefits, as long as you have funds remaining in your TDA.
Whenever you withdraw money from your TDA, you have to pay taxes on that money to the federal government and, depending on where you live, perhaps to your state and local government, too.
If you elect TDA deferral status, you are not obligated to withdraw any funds from your TDA account until the calendar year when you turn 73 years old. At that point, you will have to take a Required Minimum Distribution, which is the minimum amount established by IRS regulations based on how much money you have in your account.
If you choose to defer your TDA, you should make sure you have an up-to-date designation of beneficiary form on file with TRS or BERS to protect your heirs and beneficiaries. If you die when there is still money in your TDA account, TDA death benefits would generally be paid in a lump sum to the beneficiaries you have designated.
At retirement, you may also choose to annuitize your TDA account, which means you convert your TDA account to a lifetime stream of payments for as long as you live. You have the option to take out a lump sum before annuitizing the rest.
As with your defined-benefit pension, you can provide for heirs and beneficiaries when you annuitize your TDA. Your monthly annuity check will depend on the size of your TDA account at the time of conversion, your age and whether you provide for survivors.
You can learn more about these choices by going to the TRS website or the BERS website.
You may also attend one of the UFT’s remote TDA workshops, where Pension Department representatives discuss the details of the TDA program and teach you the fundamentals of managing your account.
This column is compiled by Tom Brown, David Kazansky and Victoria Lee, teacher-members of the NYC Teachers’ Retirement Board.