Q.: When is the best time of the year to withdraw Required Minimum Distributions (RMDs)? S.A.

A.: The annual, taxable, RMD is based on the Dec. 31 balance of the prior year. Thus, the RMD for 2020 is based on the account balance as of Dec. 31, 2019. Why have it on your mind after the first business day of 2020? There is no advantage to postponing the unavoidable and inevitable. I have always advised my clients to withdraw the RMD on the first business day of January and know that it's done.

With that said, this advice has served my clients very well except when Congress decides to waive the RMD during a national economic emergency caused by a pandemic. It waived the 2020 RMD effective March 27, 2020.

Suggestion: In lieu of taking the RMD for 2020, convert the same amount to a Roth IRA. Contact me with your questions.

Q.: I am retired (NYCERS) and have recently received mail from annuity salespeople inviting me to a dinner/seminar. What do you think of annuities?

A.: An "annuity" is just another name for a "pension". Pension/annuity income rates from NYCERS, or any other public-sector retirement system, is substantially more generous than those of a life-insurance company. MetLife, the annuity provider for the Federal Thrift Savings Plan, guarantees one 65 $6,240 annually for each $100,000 annuitized. The NYCERS guarantees the same individual $10,654. Why the massive difference? MetLife is a profit-making business. What do I think of annuities? They are great if the guarantor is a public-sector retirement system; they are lousy if the guarantor is a private life-insurance company.

With that said, a financial/health calamity presents a once-in-a-lifetime feeding frenzy for the annuity-sales industry. Retirees crave certainty and the annuity broker sells certainty. Remember: Enjoy the dinner but never hand over your money to the annuity-sales broker.

Of Note. The Teachers' Retirement System of the City of New York and the Board of Education Retirement System of the City of New York (BERS) administer two retirement plans: A qualified pension plan and a voluntary 403(b) plan.

In that light, Paul, age 65, has $700,000 in his 403(b) account. The TRS/BERS annuity income rates not only apply to their pension plans but also to their voluntary 403(b) plan. Should Paul elect to annuitize all or a portion of his $700,000 he would receive $9,728 per year for each $100,000 annuitized. The UFT refers to this guaranteed lifetime income as the retiree's "second pension."

Members of the other six public-sector retirement systems of this state (3) and city (3) do not have the same opportunity because their 403(b)/457(b) or 401(k) plan is administered by a financial-services firm other than the public-retirement system to which they belong. These union members need to petition their union leadership so they, too, may have the opportunity to annuitize all or a portion of their 403(b)/457(b) or 401(k) balances with the public-retirement system to which they belong. Why should they be denied a "second pension"?


Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at rollover@optonline.net.


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