TSP RMD's

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JerryB
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TSP RMD's

Post by JerryB » Tue Mar 12, 2019 12:35 pm

Will the TSP notify me of my RMD options when I reach age 70? Are there options for monthly, quarterly, and annual payments? tia

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HueyLD
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Re: TSP RMD's

Post by HueyLD » Tue Mar 12, 2019 1:20 pm

You can find the answers in this doc.

https://www.tsp.gov/PDF/formspubs/tspfs10.pdf

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JerryB
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Re: TSP RMD's

Post by JerryB » Tue Mar 12, 2019 2:03 pm

Apparently monthly payments is the only option for RMD's.

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HueyLD
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Re: TSP RMD's

Post by HueyLD » Tue Mar 12, 2019 2:07 pm

Did you read the link provided?

There are major changes coming in September 2019.

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JerryB
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Re: TSP RMD's

Post by JerryB » Tue Mar 12, 2019 2:35 pm

HueyLD wrote:
Tue Mar 12, 2019 2:07 pm
Did you read the link provided?

There are major changes coming in September 2019.
Duh, I missed that. Thanks!!!

Alan S.
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Re: TSP RMD's

Post by Alan S. » Tue Mar 12, 2019 8:26 pm

Here is a bullet point from the TSP Bulletin:

• You’ll be able to choose whether your withdrawal should come from your Roth balance, your traditional balance, or a proportional mix of both.

This still is not totally flexible because of the qualifier "proportional". A non proportional mix would not be allowed if you are withdrawing from more than one of the accounts.

Note that IRS rules for qualified plans allows RMDs to be aggregated in any combination between the traditional and Roth sub accounts, and that allows you to control the rate of drawdown for each account. But RMDs appear to fall under the general bullet point copied above. The TSP or other qualified plan is not forced to adopt the IRS flexibility for RMD distributions. The applicable IRS Reg is 1.401(a)(9)-8, Q&A 2 as follows:
(a)Defined contribution plan.
(1) Except as otherwise provided in this A-2, if an employee's benefit under a defined contribution plan is divided into separate accounts under the plan, the separate accounts will be aggregated for purposes of satisfying the rules in section 401(a)(9). Thus, except as otherwise provided in this A-2, all separate accounts, including a separate account for employee contributions under section 72(d)(2), will be aggregated for purposes of section 401(a)(9).
Either way, the presence of a Roth TSP results in an RMD on that amount regardless of which account the RMD comes from. Therefore, a retiree should still roll the Roth TSP to a Roth IRA prior to age 70.5 to avoid any RMDs based on the Roth TSP balance.

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JerryB
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Re: TSP RMD's

Post by JerryB » Wed Mar 13, 2019 8:01 am

As long as we are on the subject, if I don't need the RMD to live on, I am thinking of taking an annual payment early in the year to get the money into a taxable account that will invested in tax efficient index funds. Thoughts?

rkhusky
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Re: TSP RMD's

Post by rkhusky » Wed Mar 13, 2019 8:23 am

JerryB wrote:
Wed Mar 13, 2019 8:01 am
As long as we are on the subject, if I don't need the RMD to live on, I am thinking of taking an annual payment early in the year to get the money into a taxable account that will invested in tax efficient index funds. Thoughts?
Since tax deferred is better than taxable, it is generally better to take the RMD towards the end of the year.

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JerryB
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Re: TSP RMD's

Post by JerryB » Wed Mar 13, 2019 8:42 am

rkhusky wrote:
Wed Mar 13, 2019 8:23 am
JerryB wrote:
Wed Mar 13, 2019 8:01 am
As long as we are on the subject, if I don't need the RMD to live on, I am thinking of taking an annual payment early in the year to get the money into a taxable account that will invested in tax efficient index funds. Thoughts?
Since tax deferred is better than taxable, it is generally better to take the RMD towards the end of the year.
It was deferred for the last 40 years, but now it is taxable since withdrawals are required and are taxed at my marginal rate. In my taxable account, I may never pay a capital gains tax and my heirs get a stepped up basis.

rkhusky
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Re: TSP RMD's

Post by rkhusky » Wed Mar 13, 2019 9:50 am

If taxable is better, I suppose then you should not stop at the RMD, but withdraw up to the top of your tax bracket or maybe higher.

Ybsybs
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Re: TSP RMD's

Post by Ybsybs » Wed Mar 13, 2019 10:16 am

rkhusky wrote:
Wed Mar 13, 2019 9:50 am
If taxable is better, I suppose then you should not stop at the RMD, but withdraw up to the top of your tax bracket or maybe higher.
Potentially. Whether or not that would help minimize your lifetime total taxes would depend on if you are in a lower than future tax bracket for that particular year. For some people, such periods can exist: between retiring from a dayjob and before collecting social security, during years of high medical expenses, and maybe at end of life for one member of a married filing jointly couple before becoming a bereaved single filer. The time between retiring and collecting social security is the time when tax management is more likely to happen because the relative importance of tax management when severely ill or caring for a severely ill spouse tends to be low on the to do lists for most.

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House Blend
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Re: TSP RMD's

Post by House Blend » Thu Mar 14, 2019 8:59 am

rkhusky wrote:
Wed Mar 13, 2019 9:50 am
If taxable is better, I suppose then you should not stop at the RMD, but withdraw up to the top of your tax bracket or maybe higher.
No. Better to Roth convert any amounts beyond the RMD than simply withdraw them.

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JerryB
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Re: TSP RMD's

Post by JerryB » Sat Mar 16, 2019 11:02 am

Will TSP allow you round up your monthly, quarterly, or annual payment?

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HueyLD
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Re: TSP RMD's

Post by HueyLD » Sat Mar 16, 2019 1:54 pm

JerryB wrote:
Sat Mar 16, 2019 11:02 am
Will TSP allow you round up your monthly, quarterly, or annual payment?
As you already know, the withdrawal options will change substantially in September, 2019.

As of today, you can specify a certain amount to be withdrawn monthly and this amount can be a round number of your choosing.

https://www.tsp.gov/PDF/formspubs/tsp-70.pdf

VACat07
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Re: TSP RMD's

Post by VACat07 » Sat Mar 16, 2019 4:09 pm

So I’ve read the new TSP withdrawal guidelines. Does “withdrawal” mean the same as rolling over the ROTH TSP to my individual ROTH IRA? As I understand it now (before the changes are implemented), if I want to combine my ROTH accounts, I have to transfer my ROTH and regular TSP out (keeping a minimum of about $1 k in the TSP), and then transfer the traditional IRA back into the TSP. Under the new rules, I assume I can just transfer the ROTH TSP directly to my ROTH IRA and not touch the traditional TSP. Or does “withdrawal” mean actually taking a distribution not rolling over?

trueblueky
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Re: TSP RMD's

Post by trueblueky » Sat Mar 16, 2019 4:10 pm

JerryB wrote:
Tue Mar 12, 2019 12:35 pm
Will the TSP notify me of my RMD options when I reach age 70? Are there options for monthly, quarterly, and annual payments? tia
If you take monthly payments and those are not enough to meet the calculated RMD, TSP will send the rest once a year.

4nwestsaylng
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Re: TSP RMD's

Post by 4nwestsaylng » Sat Mar 16, 2019 6:57 pm

Re: the requirement that you take out your first RMD before age 70 1/2, does that mean you have to withdraw the entire amount of the RMD by that date, or can you start monthly payments through the remainder of that tax year that total the amount of RMD? I am thinking you have to withdraw the total amount before age 70 1/2, whether as a lump sum or a few monthly payments that six months prior, but that it all has to be out by 70 1/2?

I also will do Roth conversion up to the limit of that tax bracket, or the limit of the IRMAA bracket. I don't like paying the tax on the conversion, but rates will likely not be lower after current rates sunset in 2025.The only question I have in that regard is, paying tax now on the conversion prevents that amount from continuing to earn tax deferred. Even if rates are higher in the future, I wonder whether the return from tax deferred earnings over that period more than compensates for any risk of higher rates after 2025.

Any thoughts on these two issues?

trueblueky
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Re: TSP RMD's

Post by trueblueky » Sat Mar 16, 2019 7:07 pm

4nwestsaylng wrote:
Sat Mar 16, 2019 6:57 pm
Re: the requirement that you take out your first RMD before age 70 1/2, does that mean you have to withdraw the entire amount of the RMD by that date, or can you start monthly payments through the remainder of that tax year that total the amount of RMD? I am thinking you have to withdraw the total amount before age 70 1/2, whether as a lump sum or a few monthly payments that six months prior, but that it all has to be out by 70 1/2?

I also will do Roth conversion up to the limit of that tax bracket, or the limit of the IRMAA bracket. I don't like paying the tax on the conversion, but rates will likely not be lower after current rates sunset in 2025.The only question I have in that regard is, paying tax now on the conversion prevents that amount from continuing to earn tax deferred. Even if rates are higher in the future, I wonder whether the return from tax deferred earnings over that period more than compensates for any risk of higher rates after 2025.

Any thoughts on these two issues?
You must begin RMD in the year you turn 70 1/2. If your 70th birthday is April 1, 2017, you turn 70 1/2 that year and must begin RMD. The first year, you can delay taking the RMD until April 2018, but that means taking two distributions in 2018 -- the one for 2017 and the one for 2018.

As long as you withdraw it in time, it does not matter whether the withdrawal is a lump sum or monthly.

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JerryB
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Re: TSP RMD's

Post by JerryB » Sat Mar 16, 2019 7:39 pm

The changes say you can switch to a dollar amount rather than life expectancy, but you never go back to life expectancy. Does this mean I can still change the dollar amount each year as my RMD changes?

Alan S.
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Re: TSP RMD's

Post by Alan S. » Sun Mar 17, 2019 8:05 pm

JerryB wrote:
Sat Mar 16, 2019 7:39 pm
The changes say you can switch to a dollar amount rather than life expectancy, but you never go back to life expectancy. Does this mean I can still change the dollar amount each year as my RMD changes?
After Sept, 2019 you can make mostly all the changes you could make in an IRA account. Flexibility is vastly increased in the TSP. Whatever arrangement you started 2019 with, you could make whatever changes you wish after Sept. Although it does not appear you will be 70.5 in 2019 and therefore RMDs will start later, you have even more flexibility in 2019 since you can ignore RMD requirements.

Stoic9
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Re: TSP RMD's

Post by Stoic9 » Thu Mar 21, 2019 9:52 am

The way I understand TSP is that it is not an IRA. So to convert I have to roll my TSP into my tIRA at another firm, then roll it into my ROTH. My question is timing. If I have TSP send (rollover) money to tIRA firm then have firm roll into the ROTH it is at the moment it leaves the tIRA that tax is due from other monies. Do I send a check to IRS at that time or can I wait and send when I complete my taxes in APR of the following year?

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grabiner
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Re: TSP RMD's

Post by grabiner » Thu Mar 21, 2019 8:16 pm

Stoic9 wrote:
Thu Mar 21, 2019 9:52 am
The way I understand TSP is that it is not an IRA. So to convert I have to roll my TSP into my tIRA at another firm, then roll it into my ROTH. My question is timing. If I have TSP send (rollover) money to tIRA firm then have firm roll into the ROTH it is at the moment it leaves the tIRA that tax is due from other monies. Do I send a check to IRS at that time or can I wait and send when I complete my taxes in APR of the following year?
You have to have the tax paid somehow. You can ask your broker to withhold from the conversion, so that you withdraw $10K from the traditional IRA, pay $2K as tax, and contribute the other $8K to the Roth. You can have it withheld from other income you earn that year, by filing a new W-4. You can pay it as estimated tax.

If you don't do any of these three things, you may owe a penalty when you pay taxes in the following April; the penalty is interest from the date you should have made the estimated tax payment to the date you paid the tax.
Wiki David Grabiner

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