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Hi, I'm Kristen.
If you've been an active CalSTRS member since January 2001, you have two seperate accounts with CalSTRS.
The defined benefit account, and the defined benefit suplement, or DBS account.
Part one of this video described what your DBS account is and how it is funded.
In part two, we discussed the choices you have at retirement for receiving the funds.
In this part, we'll explore tax considerations.
There are three main choices for disbursement. Lump sum, annuity payment, or a combination of lump-sum and annuity.
A lump-sum payment, paid directly to you; requires a tax withholding of 20% for federal taxes.
There is also a 2% optional tax withholding for the state.
If you have a lump-sum payment rolled over into a tax-deferred account, such as a 403B or a traditional IRA,
You don't pay taxes on that money, until you access the funds.
Period-certain annuities from three to nine years, are taxed in the same manner as a lump-sum payment.
You have the choice to roll it over to a tax-deferred plan,
Or have the base taxes of 20% for federal and 2% for state, withheld, and then paid directly to you.
A base tax withholding means that the actual amount of tax you should pay is not calculated until you do your taxes.
Ten-year period-certain and lifetime annuities will be subject to withholding based on your filing status.
You will complete a form, very similar to the w-4 that will let CalSTRS know if your withholdings should be calculated,
for married or single; and the number of allowances that you would like to claim.
You're encouraged to speak to a tax or financial professional when making this decision;
As everyone's situation is different.
And there are variables that should be considered carefully when making an important retirement decision.
Visit CalSTRS.com or see the member handbook to learn more about the payment choices,
For your defined benefit supplement account.
You'll find additional publications; including tax considerations for rollovers, forms, and other resources on CalSTRS.com
Register for mycalstrs to access and manage your personal information and view your account balances online.
Thanks for watching.