Ask The Experts: Money Matters

By Mike Miles

TSP/Loan Distribution

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Q. TSP declares an unpaid loan at retirement as a taxable distribution. Participant is over 70 1/2. Does that taxable distribution satisfy the minimum distribution in the first year of retirement? Any research information is appreciated. Read the rest of this entry »

TSP rollover to IRA

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Q. I have funds in my TSP account, turn 70 ½ in 2015, and have recently been furloughed from federal service but have not resigned or been separated. I am eligible to return in 2015. I understand that if I return to federal service in 2015 without separating, I can resume TSP contributions and do not need to take RMD until I separate.

However, I understand that if I am separated from federal service in 2015 and do not choose either an annuity or a monthly distribution plan, I must accept full distribution. In that case, can I call the appropriate percentage my 2015 RMD and roll the remainder into an existing IRA with no penalty, even though I am no longer eligible to contribute to an IRA? If I can’t do that, how can I achieve the same or similar result?

A. Your understanding is incorrect. You will not be required to take full lump-sum distribution after you separate. The only requirement is that you meet the RMD amounts under the IRS rules.

RMDs and TSP

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Q. I turned 71 on 3 Feb. 3, 2014. I have not taken anything out of my TSP. I am still working, but not for much longer. Will I have to make two RMDs in 2014? Am I subject to any penalties as I stand now?

A. Since you were working, there was no RMD due for 2013. Your first RMD, for 2014, will be due by April 1, 2015. Your second RMD, for 2015, will be due by Dec. 31, 2015. You may take the first RMD, after you retire, in either 2014 or 2015, or split between both. You’ll find more info in the notice at https://www.tsp.gov/PDF/formspubs/tsp-775.pdf.