TSP Life Expectancy Monthly Withdrawal formula

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burnsh
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TSP Life Expectancy Monthly Withdrawal formula

Post by burnsh » Thu Jan 26, 2017 3:01 pm

Anyone knows what is the TSP Life Expectancy Monthly Withdrawal formula or how is calculated?
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Watty
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Re: TSP Life Expectancy Monthly Withdrawal formula

Post by Watty » Thu Jan 26, 2017 4:18 pm

I don't know about that but if you keep a TSP in retirement then you should be very sure to do the research and understand that the TSP inheritance rules will are much less favorable than IRA inheritance rules and could cost whoever inherits it a LOT.

This is greatly over simplified but the basic situation is that if you die then your spouse inherits the TSP that works OK. The problem occurs when they die and then your kids would inherit it. (There are lots of other possible permutations.) The big problem is that they can't keep the money in the TSP then so it will all be taxed at once. With a IRA the next generation can still inherit it as an IRA with special RMD rules which would usually allow then to spread the withdrawals out over many years. (That is also over simplified)

I could not believe the TSP inheritance rules were that different the first time a saw a post about someone in that situation but it apparently. As I recall having to cash out the TSP like that cost them over $100K in taxes since they were already in a high tax bracket and the large TSP distribution in one year put them in an even higher tax bracket.

https://www.tsp.gov/PDF/bulletins/14-04.html
5. In the event of the death of a beneficiary participant(ie typically your spouse), the funds in the BPA cannot remain in the TSP. The account will be distributed directly to the BPA participant’s beneficiary(ies) indicated on Form TSP-3. If no valid Form TSP-3 is on file, the account will be distributed according to the order of precedence as described in Section I above. Death benefit payments made from a BPA must be paid directly to beneficiary(ies). These payments are subject to certain tax restrictions and cannot be transferred or rolled over into an IRA or eligible employer plan. In addition, these payments will be fully taxable in the year the beneficiary(ies) receives them. Any payments from tax-exempt money are not subject to taxes when distributed.
You might want to roll the TSP out to an IRA unless there is some compelling reason not to.

ABQ4804
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Re: TSP Life Expectancy Monthly Withdrawal formula

Post by ABQ4804 » Thu Jan 26, 2017 5:27 pm

It's probably similar to how the RMDs are calculated; I'd check the IRS website for the referenced formula.

This is copied from the TSP website, Withdrawing your TSP Account:
"Life Expectancy. You may request to have the TSP calculate your monthly payment for you using the Internal Revenue Service's (IRS) Life Expectancy Tables. Your first payment amount will be based on your age and your account balance at the time of the first payment. The TSP will recalculate your monthly payment every year."

Watty made some good points about doing your research, insuring your heirs inherit as you desire. It might be preferable to transfer the TSP balance to Vanguard or other company IRA to withdraw funds as you desire. Good luck!

FEDFERS
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Re: TSP Life Expectancy Monthly Withdrawal formula

Post by FEDFERS » Thu Jan 26, 2017 9:12 pm

TSP-776.PDF -- Tax Information About TSP Withdrawals and Required Minimum Distributions for Beneficiary Participants PDF, Page 7 & 8

At TSP site enter RMD in search box > RMD page > blue link "Tax Information...PDF" as shown above. TSP RMD is same as IRA RMD.

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Groundhog
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Re: TSP Life Expectancy Monthly Withdrawal formula

Post by Groundhog » Fri Jan 27, 2017 3:00 pm

Per form TSP-70 Request for Full Withdrawal...

If you choose to have the TSP compute your payments, we will use the IRS Single Life Table, Treas. Reg. 1.401(a)(9)-9, Q&A 1 (for participants who are under age 70 after June 30 of the calendar year when payments are calculated) or the Uniform Lifetime Table, Treas. Reg. 1.401(a)(9)-9, Q&A 2 (for participants who turn age 70 before July 1 of that year).

Based on the tables mentioned above, this results in higher monthly payments before RMD age and lower payments afterward. The payments will be calculated automatically and satisfy your RMD once you are RMD age.

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burnsh
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Re: TSP Life Expectancy Monthly Withdrawal formula

Post by burnsh » Fri Jan 27, 2017 3:05 pm

Thanks a lot for the info.
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