You can only choose this option if your vested account balance is at least $10,000 and you retire at or after age 65, or at age 55 with at least 10 years of service.
Your account balance will be paid to you in annual installment payments, with estimated taxes automatically being withheld on the taxable portion of your payment as required by law. You choose the payment time period, up to a maximum of 10 years. If you die before receiving all payments, the remaining balance will be paid to your beneficiary in a single lump-sum cash payment.
Things to Consider
- The IRS requires that 20% automatically be withheld on the taxable portion of your account balance. You will have to pay additional income taxes at tax filing time if the 20% withholding amount is not enough.
- Your payment is also subject to state income taxes, and local income taxes where applicable. Some states, such as Ohio, require automatic state tax withholding. If you live in one of those states, you will have to pay additional state income taxes at tax filing time if the estimated withholding amount is not enough.