By Mike Miles
Required minimum distribution
May 9th, 2013 | Uncategorized
Q. I have a 401(k), several CD IRAs and several mutual fund IRAs. I will turn 70 the end of November. Do I have to withdraw a minimum amount from each account, or can I withdraw the required minimum amount from one of the accounts as long as it totals the amount I must withdraw next year?
Tags: 401(k), IRA, Required Minimum Distribution
Penalties for leaving money in TSP
May 6th, 2013 | Uncategorized
Q. If I leave my money in the Thrift Savings Plan, will I be penalized? Is it correct to say that I have the option of rolling it into an IRA or withdrawing all of it or part of it?
A. You may leave your money in the TSP until the IRS minimum distribution requirements begin. The TSP does not penalize you for leaving your money there.
Tags: IRA, penalty, Required Minimum Distribution, rollover, TSP
TSP withdrawal at 70 1/2, Part II
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.
Tags: 70 1/2, CSRS, IRS, life expectancy, lump-sum, Required Minimum Distribution, retirement, TSP, withdrawal
TSP withdrawal at 70 1/2
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.
Tags: 70 1/2, partial, Required Minimum Distribution, taxes, TSP, withdrawal
RMD at 70 1/2 if still working?
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.
Tags: 70 1/2, FERS, Required Minimum Distribution, TSP, withdrawal
MetLife annuity and RMD
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.
Tags: 70 1/2, CSRS, MetLife annuity, Required Minimum Distribution, retirement
TSP vs. IRA tax burden to spouse and heirs
March 11th, 2013 | Uncategorized
Q. I will retire April 30 under FERS (law enforcement agent; I will be 66½ years old) and have been exploring options available regarding my Thrift Savings Plan account. I read with interest your Feb. 4 Federal Times article “Don’t overlook TSP for lowest-cost investment” but have the following questions concerning what happens to my TSP account funds if I predecease my wife/heirs before or after the required minimum distribution takes effect.
As the annuitant, upon reaching 70½, I would have 10 years to draw down my TSP funds. What happens if I predecease my wife/heirs during this time frame? It is my understanding they will have a 5-year drawdown period, which would subject them to a heavier tax burden. Is this assumption accurate?
If I roll over my TSP into an IRA and I predecease my wife/heirs, then they would have the option of rolling over the funds into their own individual IRAs therefore avoiding a significant tax burden. Is this accurate?
A. The rules for this are complex and depend upon a number of factors. Your questions leave open too many possibilities to cover here. I suggest that you review the notice at https://www.tsp.gov/PDF/formspubs/tsp-776.pdf and then come back with any specific questions that remain unanswered.
Tags: age, FERS, IRA, law enforcement, Required Minimum Distribution, retirement, rollover, survivor benefits, taxes, TSP
L Fund
March 11th, 2013 | Uncategorized
Q. At age 65, I’ve taken your advice and have taken a full physical. I’m being very positive and very optimistic when I say I expect to be around for another 15 or 20 years. In retirement, I’ve put all of my money in the L-2030 fund, as suggested. Does it stay in the L-2030 fund when I reach the required minimum distribution age, or does it get put in the L-income fund?
A. The management decisions are up to you, but my default recommendation, if you don’t know what else to do, is to continue to use the L Fund that most closely matches your life expectancy. But that’s kind of like recommending that if you don’t know which way you should turn to get to your destination, keep driving straight. The recommendation is intended to minimize the risk of making a big mistake, but it doesn’t guarantee that you’ll get where you want to go. It takes some careful navigation to make that happen with a high degree of confidence.
Tags: age, income, L Fund, life expectancy, Required Minimum Distribution
Deadline for partial withdrawal
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.
Tags: 70 1/2, IRS, one-time partial, Required Minimum Distribution, retirement, TSP, withdrawal
Life expectancy
February 20th, 2013 | Uncategorized
Q. I’ve been retired a couple of years now and I’ve transferred the money I had sitting in the G Fund to one of the L funds. I chose the L 2020 fund, mainly because I’ll turn 70 in five years and will be forced to start withdrawing the required minimum distribution. I’ve read that you suggested putting money into the L Fund that closely corresponds to one’s life expectancy. Does that mean how long I plan to live, or is that determined by a doctor or some other expert?
A. If you’ve had a full physical exam within the past year, I think you’re the best judge of your life expectancy. If not, you should have an exam, review the results, and then make your prediction.
Tags: age, G fund, L Fund, life expectancy, Required Minimum Distribution, retirement