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TSP and RMD

Key Points:

  • Restrictions lifted on starting and restarting installment payments based on life expectancy

  • RMDs waived temporarily in 2020

  • TSP videos available

The Federal Retirement Thrift Investment Board, FRTIB, is permanently changing the rule that prevents you from starting installment payments based on life expectancy if you have previously received installment payments. In January 2021, all TSP participants eligible for installment payments may elect to receive payments based on life expectancy whether or not they once started, and then stopped, installment payments. This means that if you are currently receiving life-expectancy payments, you may now stop them, knowing that you will be able to restart them next year. You could not continue them in 2020, but you can always use other withdrawal types for which you are eligible.


This is a significant rule change, especially if you currently receive life-expectancy payments for the purpose of receiving required minimum distributions (RMDs) and want to suspend those payments. At the same time, RMDs were waived in 2020 temporarily.

To do so, log in to My Account and select Withdrawals and Changes to Installment Payments to stop your payments. To restart them in 2021, log in again and start a new transaction to request installment payments based on life expectancy. Please disregard any TSP materials that state the old rule, including instructions you may see when using the online tool to stop payments. Information is in the process of being updated.


Important Note: If you started receiving life-expectancy-based installment payments before the age of 55 and


  1. you are under age 59½ now.

OR


2. it has been less than five years since your payments started,


then stopping your payments now could have tax consequences mandated by the Internal Revenue Code and are not eliminated by this FRTIB rule change. Visit irs.gov or consult a tax advisor for more information.


The following videos on the TSP's YouTube channel are very helpful and we encourage you to view them:

Your Flexible Withdrawal Options

https://www.youtube.com/watch?v=oQh9HgrwkDI

TSP Post Service Withdrawals (this video goes into more detail, including the online wizard tool explanation that begins around the 21 minutes 35-second mark of the video)

https://www.youtube.com/watch?v=1QkQk4rA808

The video above details electing a percentage of your distribution to come from traditional versus Roth. You may select a specific dollar amount for each instead when you desire to withdraw money from both.

Although the second video is lengthy, we encourage you to watch the entire 72-minute video because the speaker covers many things that you should be aware of concerning your TSP. One note to keep in mind, when he talks about RMDs, he refers to age 70 1/2 because he recorded this video before the law was changed to age 72 for people who did not reach the age of 70 1/2 by the end of 2019. We suggest contacting TSP directly at 877-968-3778 to assess your personal account information if you have additional inquiries.


Publish Date: January 26, 2021 © Tangerine, Inc. All rights reserved. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular individual or circumstance. This article is not intended to be a client-specific analysis or recommendation. Do not use this article as the sole basis for any financial decisions. Consider all relevant information. Information should not be considered as tax or legal advice. You should consult with your tax advisor and/or attorney regarding your individual circumstances.


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