Will you be retired by the time you attain age 70.5? Are you accumulating funds in your favorite retirement account?

If the answer is yes, you will be subject to Required Minimum Distributions (RMD) starting at age 70.5. The amount of your RMD depends on the withdrawal table you use. The IRS has adopted three withdrawal tables that can be found in IRS Publication 590-B.

  1. Uniform Lifetime Table. Only retirement-account owners are to use this table. It is not to be used by beneficiaries. This table is used if your spouse is your sole beneficiary for the entire year and is not more than 10 years younger than you.
  2. Joint Life Expectancy Table. Only retirement-account owners are to use this table. It is not to be used by beneficiaries. This table is to be used if your spouse is your sole beneficiary for the entire year and is more than 10 years younger than you.
  3. Single Life Expectancy Table. This table is to be used by non-spouse beneficiaries of a retirement account. It is not to be used by the retirement account owner.

Caution: Make sure to use the table that applies to your personal circumstances. If you take out less than you should, the shortage is subject to a 50-percent penalty tax. Let’s say your RMD is $40,000 and you take out $25,000. Half of the $15,000 shortage, or $7,500, is your penalty tax. No ifs, ands or buts. Ouch!

The Federal Thrift Savings Plan (TSP) is one of the great defined-contribution investment plans on the planet. Even the best, however, can improve, as is the case with the TSP. The plan has yet to adopt an in-plan conversion program that would allow participants to make in-plan taxable rollovers from their pre-tax account to their after-tax Roth account.

With that said, the inability to convert pre-tax dollars to after-tax Roth dollars will leave long-term TSP participants with an unexpected tax liability for the remainder of their lives starting when they attain age 70.5. At death this tax liability is transferred to the participant’s designated beneficiary.


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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