Funds invested in a tax-advantaged retirement account, like FCMM, cannot be held there indefinitely. After you turn age 73, you generally have to start receiving some of this deferred income and subjecting it to taxation. The IRS has an age-based formula to calculate your required minimum distribution (RMD). There are significant penalties for failing to withdraw the RMD.
If you have converted all of your retirement investment funds to an annuity (referred to as monthly benefit within FCMM), you no longer have RMD concerns. But if you annuitize only a portion, the remaining funds are subject to RMDs.
Your first RMD must be withdrawn by April 1 of the year following the year you turn 73. If you keep working beyond 73 for an employer who continues your participation in the FCMM retirement plan, you can wait until April 1 of the year after you terminate employment to receive your first RMD. Your second RMD, however, must be withdrawn by December 31 of the same year. For that reason – to avoid two RMD amounts stacked in the same year – FCMM encourages participants to take their first RMD in the year they turn 73. Each subsequent year’s RMD must be withdrawn by December 31.
Converting to an annuity partway through the year after you turn 73 will result in an RMD liability for that year. RMDs are calculated on the previous year’s December 31 non-annuitized balance, starting with the year you turn 73.
For more description of RMD calculation, see Approaching age 73? Here's what you need to know about RMDs and Required Minimum Distributions - Update 2021 & 2023.
Your RMD withdrawal will be reported to the IRS via Form 1099R. Monthly Income Benefits (“annuity”) payments are also reported through a 1099R. RMDs, withdrawals, and annuity payments for clergy are reported as housing allowance eligible. See Quick Guide to Tax Reporting for Retirement Distributions - 1099R.