Q.: I'm 72. At $1.3 million, my TRS 403(b) account is at an all-time high and with it, my Required Minimum Distribution (RMD) for 2022 will also be at an all-time high. Is there any way to alleviate this tax bite? P.G.

A.: Yes, there is. The IRS has revised its Uniform Lifetime Table (Table III) to reflect the increase in life expectancy (longevity) that has occurred in recent years. Table III is to be used by: Unmarried Owners, Married Owners Whose Spouses Aren't More Than 10 Years Younger, and Married Owners Whose Spouses Aren't the Sole Beneficiaries of Their IRAs. This table is also to be used by owners of 457(b), 401(k) and 403(b) accounts. Table III may be downloaded here.

Let's assume your TRS 403(b) balance on Dec. 31, 2021 will be $ 1.3 million. Your RMD for 2022 will be 3.65 percent times $1.3 million, or $47,450. If Table III was not revised, your 2022 RMD would be 3.91 percent times $1.3 million, or $50,830.

PG, another way to reduce your future tax bite is to embark on a multi-year program of converting/rolling over your pre-tax TRS 403(b) balance to a NYCE Roth IRA. These annual conversions/rollovers will be taxable events. I, therefore, implore you to seek professional advice as to how much the annual conversion should be and the best way to pay the Federal, state and local income taxes. Should you decide against implementing this tax strategy, you are guaranteed to see, for the remainder of your life, larger and larger RMDs.


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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