Will turn 70 in January 2018, and trying to figure out my TSP withdrawal


Really don’t need the money at this point, but do not want to lose it or mess up future withdrawal options. What are my options?

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Asked on February 1, 2018 10:03 pm
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Hi Mike, As you turned 70 in January, you will turn 70 1/2 in July and will have to take a required minimum distribution (RMD) for 2018. As it is your first RMD, you won’t have to take it until April 1 of 2019. All subsequent RMDs will have to be taken by December 31, so your 2019 RMD would need to be taken by December 31, 2019. If you delayed your 2018 RMD until April 1, 2019, you would have two RMDs in one tax year, so you would want to decide if it really makes sense to delay your 2018 RMD to 2019.
The TSP withdrawal choices are rather restrictive despite the passage of the TSP modernization act late last year, so I think your best strategy would be to elect “substantially equal monthly payments based on the IRS life expectancy table”. Once you reach the age of having to take RMDs, this choice results in the TSP following the formula that pays you your exact RMD over the course of the year, so there’s nothing more that you will have to do. Once the TSP modernization act is implemented you will have more options.
In case you (or any other ask.fedweek.com readers) are curious as to how an RMD is determined, here’s an explanation:
Your year end account balance (for your 2018 RMD they would look at your 12/31/17 balance) is divided by a factor found on the Uniform Life Expectancy table (for the age of 70 the factor is 27.4). So, if you had $250,000 in your TSP on December 31, your RMD would be $9,124.08 – which would be $760.34 per month. But the best news is that you don’t have to do the math if you elect substantially equal monthly payments based on the IRS life expectancy table.

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Answered on February 2, 2018 2:15 pm