Posted on Thursday, 5th March 2020 by

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The new Setting Every Community Up for Retirement Enhancement, the SECURE Act, was signed into law last December.  There are significant changes to how our retirement savings are accessed and taxed. We all need to be prepared for this new reality and take the necessary steps to comply with the rule changes.

Request a Federal Retirement Report™ today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

This article discusses RMDs and how they relate to our TSP accounts under the new rules. Follow-up articles will discuss other changes such as the elimination of the Stretch IRA for non-TSP retirement accounts, part-time employees 401(k) participation improvements, and new annuity information that all retirement managers must now provide to participants.

The TSP is updating their guidance for RMD withdrawals and taxes. They posted the following notice on their website:

“The SECURE Act, which passed on December 20, 2019, changes the age at which you have to start taking required minimum distributions from 70 ½ to 72. The law excludes people who turned 70 ½ on or before December 31, 2019.” They also caution site visitors that their current RMD Advisory Notice has not been updated for the new law.

RMD Changes

The Internal Revenue Code now requires that you receive a portion of your TSP account (your “required minimum distribution” or “RMD”) beginning in the calendar year when you become age 72 and are separated from service. If you are a beneficiary participant, your deadline for beginning to receive required minimum distributions depends on whether your spouse died before or after his or her required beginning date. Beneficiary annuitants should contact the TSP at 1-877-968-3778 for clarification if needed.

Any withdrawals you make while subject to RMDs will be used to satisfy the requirement. If the total amount of your withdrawals does not satisfy the requirement, the TSP will automatically issue a supplemental payment for the remaining amount before the deadline each year.

The TSP sends out reminders, I received mine on January 1, 2020 along with a copy of their TSP Withdrawal and Required RMD brochure. It listed my required RMD for 2019, which I took last year, and for 2020. Retiree’s 2020 required RMD is determined by the total amount in their TSP account on the last day of the previous year.

Use the TSP online tool to request withdrawals from your TSP account. Log into your account and select withdrawals from the side memu. Depending on your circumstances and the type of withdrawal you request, you may be able to complete this transaction entirely online. The form is the TSP-99.

It’s beneficial that the TSP automatically sends your RMD if you don’t provide guidance. The IRS assesses a large penalty for those who neglect or simply forget to take their RMD.

Required minimum distributions cannot be transferred or rolled over. This means that if you make a withdrawal of any kind in a year that you are subject to an RMD and you request a transfer of all or any portion of that withdrawal, the TSP will first calculate and distribute any RMD amount due directly to you before making a transfer.

Anyone that turns 70 ½ starting in 2020 is subject to the new rules and don’t have to make their first RMD until age 72. I turned 70 last May. Anyone that was 70 ½ in 2019 is subject to the old rules and must continue to withdraw an RMD at 71 and each year thereafter.

All TSP participants received their 2019 Annual Statement late last month. It is a wealth of information and even provides a lifetime annuity estimate based on your end of year TSP balance. They also list your personal rate of return for the past 12 months.

The TSP initiated mandatory second level account verification for enhanced online security. When you access their site at www.tsp.gov they send a one-time TSP identity verification code to your email address or send a text message to your cellphone. You have to enter this code in the appropriate box on the website to gain access. If you call, you must provide a verification number, using this same method, to the TSP representative before they will provide personal information about your account. If you don’t have an email account or mobile phone that accepts text messages, you can’t access the online site. Individuals without this capability must call the TSP. They will ask specific questions to verify that the caller is the owner of the account.

Scheduling A Retirement Benefits Seminar

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefit briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics.

Schedule A Seminar in Your Area

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefit briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics.

Helpful Retirement Planning Tools / Resources

Request a Federal Retirement Report™ today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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