I have a 457(b) from a state (Minnesota) employer which allows me to withdraw money from it in either regular monthly amounts or via 1-time withdrawals.
Years ago (5-7?) I was told that once I start regular monthly withdrawals, the maximum amount I could set up for a regular withdrawal (when I start doing so or each time I change this amount) was equal to the current balance of the fund divided by the number of months remaining in the 10-year period beginning when I began such withdrawals. Furthermore, the 10-year period resets if I stop taking monthly withdrawals and then begin them again in a later month, but does not reset if I change the withdrawal amount.
So, e.g., if I have 120K in the fund and begin monthly withdrawals in January 2015, I could withdraw $1k/month. But if I do that for 5 years and the investments do well, so that by 2020 the fund still has 90K left, then I could change the monthly withdrawal amount to 90K/60 = $1.5K/month. And if in 2024 the fund still had 60K left, I could change it to 5K/month. But if I stopped taking monthly withdrawals in January 2024, then restart them the next month with 60K left in the fund, I can only take $500/month since the 10 years get reset.
This is all separate from rules for one-time withdrawals, which I could do anytime in any amount in addition to periodic payments. But such withdrawals, or monthly withdrawals in excess of the above amounts, had a minimum 20% withholding amount. I typically didn't want that, so I found it useful to take minimal monthly payments of $50 once I restarted this, changing them only when I needed, so that in future years I could increase these considerably if I found this useful.
A few years ago the fund management company changed, but I assumed the rules had not. But I just called the new company about this and the representative told me that his understanding was that the 10-year period restarted each time I changed the month withdrawal amount. If so, my current $50 monthly withdrawal amount is pointless, as I'll invoke the 20% withholding requirement anytime I increase the withholding to more than (current balance)/120.
I also know that a few years ago, I temporarily increased my monthly withdrawals to $2000/month for three months, more than the balance/120, and did not have to have 20% withheld.
So my question is, is the current representative just wrong, or did the rules change recently? I understand that the IRS did create new withholding forms for this situation effective this year, but I couldn't determine if this was accompanied by an actual change in the rules.
