Q. Just how is the minimum distribution calculated for the TSP? I understand calculations based on life expectancy tables, but not how the minimum amount is calculated. I am assuming that it would be less than that based on life expectancy. I am FERS and plan to retire in June. A. In general, the Required Minimum Distribution amount is calculated by dividing the prior year’s ending account value by the appropriate life expectancy factor. There are specific rules that may apply to certain situations, however. See IRS Publication 590 for instructions for calculating the RMD.
Author Mike Miles
Mike Miles
Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.
Q. I currently have about $75,000 in a money market at a local credit union — this money market used to belong to my father, but my name was on the account also. When he passed away I moved that money into my own credit union account. May I take $50,000 out of the money market and put it into an IRA and then when I retire (in three years) move that IRA money into my TSP? A. I’m not sure how you’ll get the money into an IRA, unless it’s already in once, since contributions are limited each year.…
Q. A friend of mine in the office (Federal, CSRS) recently passed away. His wife, in looking through his TSP account, discovered that he had withdrawn $70,000, but she cannot figure out where that money went because she finds no records other than the withdrawal itself. If you have any ideas of how I might help her track it (or anyone involved in federal service TSP), or discover what happened to it, it would be extremely helpful. A. If the TSP made the check payable to him, then the answer can only be found in his records, and not in…
Q. I am planning on retiring within a year, at the age of 55. When will I be able to withdraw funds from the TPS account without a tax penalty. My understanding is at any age once retired but I would like to make sure I am correct on this. A. As long as you retire from federal service during or after the calendar year in which you reach age 55, your subsequent TSP withdrawals will not be subject to the early withdrawal penalty.
Q. Why do you consider the TSP Monthly Payment Calculator useless? I have only G Fund allocations now that I am close to my FERS retirement of 34 years. I have even transferred all dollars from a traditional IRA into the TSP for ease of management and greater total G fund assets. My retirement stool has four legs: military reserve retirement, FERS, early Social Security income and TSP. The calculator allows us to put in any part of our accumulated expected TSP value that we desire for retirement supplementation and somehow calculates that against expected growth without any future contributions…
Investors, unsure about whether they are on track to meet their financial goals, frequently ask me to perform a financial “checkup.” I suspect that is the result of three influences: They are concerned about their ability to maintain their desired lifestyle for as long as they are alive; they have seen financial checkups relentlessly offered by various purveyors of financial services and products; and they lack the time or specialized knowledge to determine the answers for themselves. Although many people are willing to pay a handsome price for this service, I rarely comply since I don’t believe the one-time financial…
Q. I am thinking about starting to put my TSP contributions into the new Roth TSP. I already have an adequate amount in the regular TSP, and I am thinking the amount going into the Roth will go to my kids after my wife and I are gone. I understand the inherited Roth TSP will be tax-free to them — is that right? I am disappointed I cannot transfer my Roth IRAs into the new Roth TSP — why is that? A. This is basically correct, if you’re talking about federal income tax. There are rules that must be obeyed,…
Q. I have been in the Federal Employees Retirement System as an Army civilian since October 1989 and contribute to TSP. I have active-duty Army time from 1979 to 1989 that I can buy back. I know I should have done this a lot sooner to avoid interest. But I didn’t. Would it still be a worthwhile financial option? I’ve done all the paperwork except to start making payments on the amount determined, which includes about $6,000 in interest and $3,000 for the original amount of the buyback. Would using a TSP loan to pay it all off make sense?…
Q. I will have 40 years with the IRS in 2012 and plan to retire either this year or in 2013. I have been contributing to both the TSP and the Voluntary Contributions Program. I plan to leave the TSP contributions to the G Fund alone and just let it grow. The VCP is another matter. I have a Roth IRA with Vanguard and would like to transfer all of the VCP to the Vanguard Roth IRA.I know I am required to pay tax on the interest the VCP has earned in the year received. The question is how do…
Q. Why are variable annuities such a bad retirement option? I have seen this stated many times, but I’m still not sure why this is the case. On the other hand, I’ve almost never seen any investment outperform the TSP stock funds on a long term basis. I have rebuffed the efforts of my financial adviser (and many other advisers during lectures) to get me to roll over the TSP to “more flexible” IRA options. A. Because they are expensive. Keep your money in the TSP. Your financial adviser is a salesperson who wants the big fat commissions you’ll pay…