Retiring INPRS members may select a new option for accessing their defined contribution (DC) account balance called a systematic withdrawal plan (SWP).
Systematic withdrawals (sometimes referred to as installments) allow you to set up a payment schedule from your INPRS DC account on a monthly, quarterly, semiannual, or annual basis. The remaining balance of your DC account will continue to be invested in the market based on your elections while you are receiving systematic withdrawals. Members who choose this option can make changes at any time, even discontinuing the withdrawals completely. In fact, it is wise to review your withdrawal amounts and investment returns on a regular basis, such as once a year.
There is a 20 percent mandatory withholding on all payments and state tax withholding may be applicable, depending on your state of residence. If payments exceed ten years, ordinary income tax will apply. If you are subject to a Required Minimum Distribution (RMD), SWP payments can apply towards the required distribution amount. If the RMD was over/underpaid, the RMD will be reconciled at the end of the calendar year. Should you pass away before exhausting your DC account, the remaining DC balance will pass on to your beneficiaries.
For example, if your DC account balance is $50,000 and you set up a monthly systematic withdrawal of $500, the remaining $49,500 after the first month will continue to be invested based on your elections. Both the remaining balance and your monthly payment could go up or down, depending on market performance and your selections.
Could systematic withdrawals be right for you? Here are some things to consider:
Watch this video from Metlife® "Providing Retirement Income in a Defined Contribution World" for information about the DC account payment options available to you in retirement.
- Systematic withdrawal plans can be appropriate for those with higher risk tolerance and who want more control over their retirement savings.
- SWPs are not a source of guaranteed lifetime income. With SWPs, it is critical for you to determine how much of your portfolio can be withdrawn on an annual sustainable basis. Your financial advisor may be a good source of information regarding SWPs.
- How much income you will need, what for, and for how long in retirement? Establish a retirement budget and designate your sources of retirement income to cover each expense.
- There is no guarantee that payments will last a certain period or lifetime. Would you be able to do without your systematic withdrawal?
- Market fluctuations: the daily increase/decrease in your account value will affect how quickly you deplete your balance and, if you choose a percentage-based payment, what your monthly payment may be.
- Can you withstand a different monthly payment amount? Systematic withdrawals are variable meaning that if you select a monthly payment based on a percentage of your balance, your monthly payment is expected to go up or down, due to market fluctuations.
- Assets to Income (flyer)
- Lifelong Income and Financial Flexibility
- MetLife® Retirement Income Management
- Retirement Income Resources
- Understand your retirement income options
- Systematic withdrawals FAQs
Ready to get started?
Log on to your account at www.myINPRSretirement.org, start your retirement application, and follow the prompts in the DC account section, select systematic withdrawals, and continue through the step-by-step application. Please note: Members of the LE DC, My Choice, and others who are eligible to request a distribution from their DC account may make a request from the “request a distribution” page of your account.