Q: Does TSP use only one IRS table for calculating Minimum Required Distributions for TSP participants 70-plus years old? My wife is 17 years younger than I am, so we will want to use the IRS table for “Joint Life and Last Survivor Expectancy” (IRS Pub 590, Appendix C), which is available for people whose sole beneficiary is more than 10 years younger. However, my reading of the TSP website materials (pub TSP-775 “Important tax information about your TSP withdrawal and required minimum distributions”) indicates that TSP uses only the “Uniform Lifetime” table for everyone. Is that correct? If so, it would result in significantly greater distributions than I am really required to make, which would make TSP an expensive alternative for me.
A: You’re right. If you’d rather use the Joint Life Expectancy table to calculate your RMD, which will produce a lower distribution, you’ll have to roll your TSP assets into an IRA account. I’m not sure that I agree that the higher distribution rate will make the TSP “expensive”. You’ll pay taxes now that will be due eventually, in any case. Will withdrawing your money now mean that you’ll pay a higher tax rate on the distribution than you will in the future? Who knows? You will definitely pay higher expenses in an IRA than you will in the TSP. The question is whether any tax costs will exceed the expense savings.