Notice of Required Minimum Distribution


I turned 70 1/2 in 2017 and forgot about taking the distribution. Now I have a TSP notice that I must take 2 distributions. I am so confused on how I can take it. Can I combine the totals (2017 & 2018) and take monthly? Can I take both at once in one check? Can I open and IRA and transfer to it (do no have an IRA now). What is best way to do this tax wise? I need to answer TSP and the clock’s ticking.

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Posted by (Questions: 1, Answers: 0)
Asked on January 16, 2018 11:09 pm
Private answer

Your 2017 distribution must be taken by no later than April 1, 2018. You have until December 31, 2018 to take your 2018 distribution.
I would think that the easiest way to deal with this issue is to take a partial distribution that is the amount of your 2017 and 2018 distributions before April 1. You can do this if you haven’t already taken a partial withdrawal.
Tax law prohibits you from rolling over a minimum distribution. If you want to roll your TSP account into an IRA, you will have to take your 2018 distribution first.
Current rules allow you only two withdrawals from the TSP, so if you take a partial withdrawal that covers your 2017 and 2018 distributions, you will only be allowed to take a full withdrawal after that. Fortunately, “substantially equal monthly payments” are considered a method of full withdrawal. If you set up monthly payments after taking your distributions, you should be good from here on out. The TSP will check each December to see if your monthly payments equal the amount of your required distribution and, if they aren’t enough, they will send you a payment that makes up the difference. It’s kind of like putting your TSP on auto-pilot.
The recently passed TSP Modernization Act will allow more flexible withdrawal choices, but the chance of it being implemented by April 1 are slim to none. If I were you (which of course I am not), I would do as I suggested above; that is 1) take a partial distribution before April 1 that covers your 2017 and 2018 distributions and 2) set up monthly payments from here on out.

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Posted by (Questions: 0, Answers: 61)
Answered on January 17, 2018 3:22 pm