By Mike Miles
April 24th, 2013 | Uncategorized
Q. I am retired CSRS. I was born Nov. 15, 1942. Therefore, I’ll be 70½ on May 15.
1. When will I have to start taking payments from my Thrift Savings Plan account?
2. Can I wait until January to March 2014 before I get my first payment?
3. What is the minimum I will have to take?
4. I do not want a total lump-sum payment.
5. Do I have to take a monthly payment, or can I get my minimum payment once a year?
6. What form do I need to submit to get minimal payments each year?
7. Can you provide the form?
A. You are required to take your first withdrawal by April 1, 2014. This will be the required minimum distribution for 2013. You are then required to take the 2014 RMD by end of the day on Dec. 31, 2014. The RMD amount is calculated for each year and will likely be different each year. The amount is calculated using the method described in IRS Publication 590. The TSP will calculate the RMD amount for you and send you monthly payments to meet the requirement. Use Form TSP-70 to request the monthly payments based on your life expectancy. You may take one lump-sum distribution from your TSP account and may only take monthly payments after that.
April 24th, 2013 | Uncategorized
Q. I have to withdraw my Thrift Savings Plan because of my age (70½).
I am indecisive as to:
1. Withdraw all to a saving account
2. Get a partial withdrawal for 120 months, or
3. Withdraw part of it and gradually withdraw the rest over a 10-year time span.
My considerations are:
1. No taxes, as I understand it, over a period greater than 10 years on a gradual withdrawal
2. Putting me into a higher tax bracket.
What advice or comments can you give me?
A. Unless you can come up with a good reason – that is, using actual estimates of costs, taxes, etc., rather than just qualitative statements – I don’t know why you would take any more than the required minimum distribution each year.
April 9th, 2013 | Uncategorized
Q. I am a FERS employee who will turn 70 in September. I fully expect to be working at 70½. Will I be required to take the minimum withdrawal from my Thrift Savings Plan account if I’m still working?
A. As long as you are still working for the federal government, distributions from your TSP account will not be required.
April 2nd, 2013 | Uncategorized
Q. You have suggested that individuals invest their TSP funds in the life cycle fund most closely approximating their life expectancy. Would that still apply to a CSRS employee who does not anticipate accessing funds until age 70½?
A. Yes, but keep in mind that this was my advice to those who are not sure what else to do.
April 2nd, 2013 | Uncategorized
Q. I am 70½ years old and about to retire under CSRS. If I use my Thrift Savings Plan account to purchase a MetLife annuity, how are the required minimum distributions handled?
A. Life annuity payments satisfy the RMD for the amount of money used to buy the annuity.
March 21st, 2013 | Uncategorized
Q. I am 64 years old and will be retiring in a year. I have 15 years with the federal government. Do all of my Thrift Savings Plan contributions have to be withdrawn prior to a specific age?
I also understand that my total TSP account will be charged 20 percent. Am I to understand that after the 20 percent is subtracted from my TSP account, I have to pay income taxes per year for withdrawals I make from my TSP account that will be added to my total gross income?
A. You will be required to begin taking minimum annual distributions from your TSP account when you reach age 70½, but there is no requirement to deplete your TSP account during your lifetime. Under certain circumstances, the TSP may withhold 20 percent from your withdrawal as a deposit against your tax liability for the year of the withdrawal. Your TSP withdrawals are added to your gross income for the year and taxed as ordinary income.
March 11th, 2013 | Uncategorized
Q. I retired Dec. 29 at the age of 70 years and five months. I plan to take my Thrift Savings Plan money out, according to the Internal Revenue Service required minimum distribution table, which I understand I must begin no later than April 1, 2014, the year after the year I turn 70½. However, I may decide to take my one partial withdrawal, as well, and at the latest possible time. I’m pretty sure I read that I must make that withdrawal option effective by Dec. 31, 2013, the year I turn 70½, but now I can’t come up with that reference in writing. Can you verify that is the case? And if it is, do I need to begin the monthly payments at the same time?
A. There is no deadline for making the partial withdrawal.
February 18th, 2013 | Uncategorized
Q. It is my plan to continue working past age 70½, which will allow me to not take minimum distributions until after I separate from service. However, I have found nothing that speaks to continuing contributions beyond 70½. I would like to continue contributing if possible. What can you tell me about that?
A. You may continue to contribute up to the usual limits until you separate from covered service.
February 11th, 2013 | Uncategorized
Q. I’m trying to understand why the Thrift Savings Plan calculator that allows “monthly” or “lifetime” projections automatically defaults to the required minimum distribution amount at age 70½ when my (expected) withdrawals are more than the Internal Revenue Service RMD limit. Which takes precedence: the IRS RMD which produces a significantly smaller amount of TSP payout, or the amount I wish to take out?
A. You must take at least the RMD amount each year to avoid a substantial penalty.
January 28th, 2013 | Uncategorized
Q. I am 62 years old and still a federal employee (for the next several years). I am thinking of withdrawing $100,000 of the $250,000 I have invested in Thrift Savings Plan. The purpose behind this withdrawal is to save paying federal taxes on this amount. That is, we will be selling an investment property that has $100,000 in “unrealized tax losses” and we should be able to offset the taxes owed on the $100,000 TSP withdrawal with the $100,000 loss from the sale of the property.
I am confused by a statement on the TSP website that says if you make an age-based withdrawal, “you will lose the opportunity to make a partial withdrawal from your account once you are separated from federal service.” What does that mean?
After the $100,000 withdrawal, we will still have $150,000 in the TSP account. Does “losing the opportunity to make a partial withdrawal once separated from federal service” mean we can withdraw only the required yearly amount once I reach 70½ and can make no other withdrawals before that time?
Does it mean that we could not, in the future, withdraw another $75,000 if we needed/wanted it?
Does it mean we could withdraw only the whole amount ($150,000) left in the TSP account?
A. You are allowed only one partial withdrawal from your TSP account. After that, your only option is a full withdrawal, which can be in the form of monthly payments or a lump sum, or monthly payments ending in a lump sum. Before you make your age-based, in service withdrawal you should consult a CPA to make sure it will work. Your withdrawal will be considered ordinary income, and not capital gains, for tax purposes.