I will retire (FERS) at the end of this Dec and have been reading up on TSP. Just when you think you have the TSP system figured out, a new wrinkle pops up. I would like to know if I am correct in this or not.
I was planning on taking out a large amount right after I retire and then set up a specific monthly payment amount that meets my financial needs. I understand that I can change that monthly amount (increase or decrease) once each year. Now the wrinkle.
At age 70.5 the IRS requires that a Required Minimum Distribution (RMD) be made each month. This RMD amount is determined by the individual's life expectancy based upon actuary tables and the amount in your TSP account at age 70.5. If you are not having any monthly payments taken out, at age 70 TSP will notify you of the RMD amount that they have determined should be withdrawn from your TSP account each month, and at age 70.5 that amount will start being sent to you. I 'assumed' this applied only to those individuals that were 'not' taking out any money each month. However, it seems that even though you are taking money out...an amount you determine that meets your financial needs...at age 70.5 the TSP will evaluate the amount you are taking out against an RMD based upon life expectancy actuary tables. If the amount you are taking out equals or exceeds the TSP determined RMD, no problem. But, if the RMD exceeds what you are taking out, a 'catch up' distribution will be taken out at the end of the year and sent to you. What I don't know is what will happen in the following years, i.e., you are notified to increase the amount to reflect the TSP determined RMD or a catch up payment sent to you at the end of the year.
Am I off base here or is that essentially correct?
Posted by: skays@cox.net
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