Q. I am 70 years old and have about $100,000 in my Thrift Savings Plan accounts. Can you guide me toward the best options to withdraw the amount? I would prefer to pay the least in taxes to Uncle Sam. A. To minimize the tax burden from required minimum distributions, you should request distributions based on your life expectancy under IRS rules. For the first distribution — the one due for the year you reach age 70½ or retire, whichever comes last) — you should consult a tax adviser to determine whether it is better to take it in that…
Browsing: life expectancy
Q. I am retired and turn 70 this month. Even though I do not want to begin distribution of my Thrift Savings Plan investment, I understand that by law I must select a required minimum distribution program. My dependent spouse is 76 and also retired. I am healthy and, with my family genetics, could expect to live to age 100. I do not need the TSP to live on and want to maintain it in the TSP investment form for as long as possible. Under these circumstances, what is the best RMD to select: a life annuity or a TSP monthly payment? Should it be…
Q. I retired in 2011 and must start required minimum distributions soon. I understand taxation if the Thrift Savings Plan sends me fixed dollar payments or if TSP pays out based on life expectancy. But what if I have TSP buy an annuity with part of my TSP and I leave the balance in the TSP? How are taxes figured? A. Your annuity income will be taxable as ordinary income and you will be required to take RMD from the remaining TSP balance, which will also be taxed as ordinary income.
Q. I am planning to retire at 65½ years of age. Can I withdraw monthly a certain amount between 65½ and 69½ and change to the life expectancy option at 70? A. This is not allowed, but if you reduce your fixed monthly withdrawal to an amount that does not meet your required minimum distribution for the year, the Thrift Savings Plan will issue a payment to make up the difference and ensure that your RMD for the year is met.
Q. I am an air traffic controller who will be forced to retire in May 2016 when I turn 56 with 28½ years of service time. If I retire anytime between Jan. 1, 2015 (the year I turn 55) and May 2016, will I be able to take out a lump sum and monthly payments from my Thrift Savings Plan without the 10 percent tax penalty? Do I have to follow the life expectancy requirement for receiving monthly payments, or am I free to set the payment amount as I wish and adjust it once a year? A. Since you…
Q. I have read Q&As on your site that refers to using one’s life expectancy as basis for selecting a particular L Fund. Per the Thrift Savings Plan site, L Fund investment mixes (and recommended strategy for selecting) are based on the time horizon vis-a-vis one’s projected retirement date — hopefully a different date than one’s life expectancy. Could you please explain the reference to life expectancy? A. Using your life expectancy to select an L Fund, rather than your retirement date, is my recommendation based on years of working with clients who are trying to safely maximize the standard…
Q. I am a federal law enforcement officer. I recently read an article that discussed the downside of the Roth TSP for federal law enforcement officers and firefighters. Is this true? ************* Many of you are probably unaware of the serious pitfalls you will encounter if you opt to contribute to the Roth TSP. For a federal law enforcement officer or firefighter, the Roth TSP is a poor choice. It wasn’t until this week that a reader posed a question to me that caused me to realize what a bad idea the Roth TSP is for many of us. The idea behind…
Q. My husband is retired for seven years now and is 67 years old. So far, we haven’t needed to use this money. We are trying to keep our income below $70,000 per year to stay eligible for our state property tax freeze, which is a significant saving of $2,000 or more per year. 1. What percentage or dollar amount are we required to take out each year? 2. Did I read correctly on someone’s question that if we set up a 10-year timetable we do NOT have to pay taxes on that money? A. The required minimum distribution changes each year based…
Q. I am 49 years old and have 24 years of service with the Bureau of Prisons. If I retire at age 51 with 26 years of service and elect a life expectancy withdrawal from my Thrift Savings Plan account, would I be able to change to a specified amount at age 55 without a 10 percent penalty, or will I have to wait until age 59½ to change my withdrawal option to avoid the 10 percent penalty? A. To meet the 72(t) exemption to the early withdrawal penalty, your series of payments cannot change until it has been completed —…
Q. In Reg Jones’ column, he states, “Choosing to buy an insurance policy instead of a survivor annuity is seldom a good idea. Could you please expand on that thought? The financial planner I talked to, who also sells insurance, says if you are healthy, the insurance route will be cheaper to pay for and more lucrative in the end. If you plan on dying young, the survivor annuity is best. A. This is a complex decision, and you should proceed with care since it is irreversible once it’s made. The simple answer is “guarantees.” The federal survivor annuity is the…