By Mike Miles
November 11th, 2013 | Uncategorized
Q. I am considering retirement at 62 (FERS) but not collecting Social Security until my full retirement age of 66. I know that once you start withdrawing from your Thrift Savings Plan account, you must continue to make withdrawals each year. To bridge the time from 62 to 66, I’m thinking of taking funds from my IRA instead. If I start taking withdrawals at 62, can I stop taking withdrawals from my IRA at 66 when I start Social Security and then resume withdrawals at 70½?
A. You’ve got the right idea, and it will work. You may start and stop IRA withdrawals any time you want to. When you reach age 66 and stop taking money from your IRA, you should transfer what’s left into your TSP account, if it’s all pretax money.
November 11th, 2013 | Uncategorized
Q. I turn 70½ in April 2014. My required minimum distribution can be taken anytime during 2014. Is it calculated on the balance in my IRA for 2013 or 2014? If I take it in 2014, the year I turn 70½, will I also have an RMD taken out Dec. 31, 2014, on the balance in my IRA in 2014? Will I have two RMDs in 2014?
A. Your RMD amount for each tax year is calculated for each account that is subject to the RMD, and is based on the preceding year’s ending account value.
October 30th, 2013 | Uncategorized
Q. I am reading TSP-775 (6-2013) concerning important tax information about TSP withdrawals. First paragraph (Deadline for withdrawing your TSP Account) states that “By April 1 of the year following the year you become age 70.5 and are separated from Federal Service, the TSP requires that you withdraw your entire account balance in a single payment.” It goes on to give options about monthly payments, life annuities. This leaves me perplexed. I thought I only needed to withdraw the required minimum distribution after becoming age 70½. Also, I thought if I have other IRAs, I could take the RMD from those and leave my Thrift Savings Plan unscathed. If I withdraw the entire account balance from my TSP, I will have to pay federal tax on whole amount. Can you clarify?
A. Here’s what you read:
By April 1 of the year following the year you become age 70½ and are separated from Federal service, the TSP requires that you withdraw your entire account balance in a single payment, begin receiving monthly payments, purchase a life annuity, or use a combination of these withdrawal options.
The requirement is that you do one of the three basic options separated by commas (full lump-sum withdrawal, monthly payments, purchase a life annuity), or elect some combination of them by the required beginning date.
Unfortunately, the TSP does not allow you to waive the RMD for your TSP balance. It must be taken from your TSP account.
October 28th, 2013 | Uncategorized
Q. I am 70 years old and have about $100,000 in my Thrift Savings Plan accounts. Can you guide me toward the best options to withdraw the amount? I would prefer to pay the least in taxes to Uncle Sam.
A. To minimize the tax burden from required minimum distributions, you should request distributions based on your life expectancy under IRS rules. For the first distribution — the one due for the year you reach age 70½ or retire, whichever comes last) — you should consult a tax adviser to determine whether it is better to take it in that year, or defer it into the following year. If you’re not sure, it’s probably best to take in the first year.
October 22nd, 2013 | Uncategorized
Q. I will turn 70½ next year and understand I need to take withdrawals from my retirement accounts. Can I add all of my accounts together — IRA and Thrift Savings Plan — compute the required minimum distribution, and then withdraw from one account which is not doing as well as the others, as I can if I have only IRAs? I want to withdraw my entire minimum from one IRA. Or must I take a minimum withdrawal from my TSP separately from my IRAs?
A. You must compute the required minimum distribution for each account separately, but you may take your RMD from any account or accounts you wish. You should leave your TSP account untapped for as long as possible, unless there is good reason to do otherwise. I don’t see what historical performance has to do with the choice of account for withdrawals.
October 3rd, 2013 | Uncategorized
Q. I am 70 years old and still employed by the federal government. When I am 70½, I understand I must take a required minimum distribution from my traditional IRA/401s, but not clear if this applies to my Thrift Savings Plan account. Can you please tell me what the rules are for those who are 70 and over but still working for the government insofar as taking a required distribution from my TSP account? Can I wait until I retire from government?
A. You may wait until you retire. You may also be able to transfer your IRA/401k balances into the TSP to avoid or delay future RMD. Consult your tax preparer and www.tsp.gov for information and advice.
September 18th, 2013 | Uncategorized
Q. If I have Thrift Savings Plan funds in both G and C funds when I am required to begin taking required minimum distributions at age 70½, can I specify which funds the RMD are taken from? (My concern is that the C Fund may be at a low due to market conditions, and withdrawals may be better to defer till the market improves.)
A. TSP distributions are always taken proportionately from your various holdings at the time. I don’t see the rationale for your concern, though. Your account will be allocated exactly as it was before the withdrawal. If you don’t like the allocation, you can rebalance it. Alternately, you could invest the proceeds from the withdrawal in the equivalent of the C Fund in a discount brokerage account and be right back where you started.
August 29th, 2013 | Uncategorized
Q. I am the CSRS retiree who turned 70 years old in July. My email was posted Aug. 19.
Boy, you have a way of really making a person feel small and stupid. I chose to start withdrawing my money so I wouldn’t have to be concerned about the 70½ deadline. These withdrawals were based on my life expectancy, and I knowingly started withdrawing my money a little ahead of time. I have not concluded that I am not receiving any gain from the G Fund with the Thrift Savings Plan. I wondered why I was taking such a significant hit from the fund with DWS Scudder, which is also a GNMA fund?
I have taken your advice, and my DWS Scudder IRA is now being processed to be transferred to my TSP account. I appreciate the advice, but you could have been a little less brutal.
A. Oh, please! There’s was nothing “brutal” about my answer. If you didn’t want an honest, direct answer to your question, you should have asked a banker, broker or insurance agent. Furthermore, I gave you good advice that you’re using to your advantage — for FREE! A simple thank-you would have been sufficient.
But I’m not one for carrying a grudge, so I’ll answer your additional question, which was not clear to me in your earlier question: The DWS Scudder fund lost money because it is a bond fund and is subject to losses in an environment of rising interest rates. The G Fund is not a bond fund and is not subject to the risk of loss. They are two different types of investments.
August 29th, 2013 | Uncategorized
Q. I’ve been making substantial contributions in the Roth TSP and plan to do so until I retire. I have a large sum in my non-Roth TSP account. I’ve read that when I begin to take TSP withdrawals in retirement, I cannot specify whether they come from the Roth or non-Roth TSP. I read that the withdrawals will be taken pro-rata from both forms of the TSP. Is that correct?
If I want my Roth TSP to grow for as long as possible, is there anything I can do to preserve it other than keep delaying all TSP withdrawals until age 70½? For example, may I transfer only my Roth TSP to a Roth IRA with a company like Vanguard?
A. Your understanding is correct. Your withdrawal(s) will be taken, pro-rata from both balances, but you may elect to transfer all or part of each payment to a corresponding (traditional or Roth) IRA wherever you like.
August 8th, 2013 | Uncategorized
Q. I have a Thrift Savings Plan account as a CSRS retiree. I also turned 70½ this year and have non-Roth IRAs. Can I take a distribution from one of the IRAs that will satisfy the required minimum distribution calculation for my TSP account and all non-Roth IRAs? If so, would I still have to take a distribution from my TSP account just because I turned 70½?
A. According to the Internal Revenue Service rules, you should be able to satisfy your entire RMD requirement using one or more withdrawals from any covered account or accounts. The TSP will automatically distribute its share of your RMD each year, however.