Delivered on: Friday, May 17, 2024
To watch on YouTube, CLICK HERE
TSP’s Required Minimum Distributions
Discovering the real impact RMDs have on your TSP account value, taxes, other benefits, and your heirs:
- ISSUE: IRS rules require participants to take distributions from tax-deferred accounts like the TSP
- EFFECT: Higher taxable income in retirement affects your tax obligation and other benefits like Medicare
- LEGACY: How RMDs work if you leave your TSP to someone else when you pass
- TIMELINE: The time to solve or minimize the RMD problem (and what happens if you do nothing)
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Prefer to read instead? A transcript of this webinar is below:
Hello and welcome to the FedImpact webinar today on the Thrift Savings Plan Required Minimum Distributions. This probably isn’t the most exciting topic to talk about but, certainly, we’ve got a big looming tax issue ahead for most of you and I’m glad that there are so many of you registered today because it tells me that you’re thinking about the future and what things are going to look like tax wise for you and you want to be prepared.
You guys know me, I’m Chris Kowalik. We’re here every month doing these sessions because I want to make sure that feds are equipped and armed with the right information so that your eyes are wide open as you step into retirement so super glad that you’re here.
TSP’s Required Minimum Distributions
TSPs Required Minimum Distributions, discovering the real impact of RMDs and what they have on your TSP account value, taxes, other benefits and your heirs or your beneficiaries. And so, boy, we’re going to unpack a lot of this today.
Agenda
Our basic agenda, we’re not going to follow these in linear order but this is going to be woven through everything that we’re doing.
- First, we have to identify what the issue is. The issue is that the IRS has some rules that are going to require you to take some money out of your TSP account whether you like it or not.
- We also want to know the effect that this has, what effect does this have on other benefits and the tax obligation that you have and benefits like Medicare, those are going to be big pieces that you’re going to want to pay special attention to.
- Next is legacy. How do RMDs work if someone else gets your TSP? If you pass away and you’re leaving it to somebody, what happens then? Do they get to avoid them? Do they have to take them? How’s that work?
- And then, lastly, the timeline. We want to make sure that you have a really good timeline awareness of when RMDs are supposed to begin and what happens if you do nothing.
And that’s different in the private sector versus in federal service and today, you’re going to hear all about the federal side that maybe you don’t hear a lot about when you’re reading other articles generally about RMDs in the private sector.
What this webinar will NOT cover
I’m not here to give you tax advice, I encourage you to be working with a smart person that has your whole financial picture in front of them so that they can help you to weave all of this together and make this make sense for you. Having a great tax professional in your corner will be super, super helpful to make sure that you’re looking at the entire picture that you have and making good tax decisions.
How much of your TSP account is really yours?
Here’s the big question I want you to ask yourself right now. How of your TSP account is really yours? I’m going to guess that you can’t say 100% of it. I can actually say that with great certainty that you are not able to say that today because each one of you have a traditional side of your TSP account. Even if you’re putting all of your own contributions to the Roth side of your account, you still have the traditional side and Uncle Sam has given you a great break for now but he wants you to pay all your taxes.
We’ve got to make sure that we know when that’s happening and RMDs are a subset of the taxes that you’re going to be paying or the thing that happens that cause a taxable event for your money but, of course, you might also just be taking regular money out of your account that, of course, is going to be taxable as well if it’s coming from the traditional side.
When you look at that TSP statement, you have to realize that a good portion of that money is not yours and when you have to fork it over is oftentimes determined by the required minimum distribution timeline. Of course, you might also take that money out prior to this timeline being triggered.
High-Level Overview of RMDs
The IRS essentially says, “Hey, listen, you’re not allowed to keep funds in these tax deferred accounts forever.” If you have accounts like the traditional TSP and others, traditional IRAs, 401(k)s, that type of thing, your tax break only goes so long and so they’re going to require individuals with these types of accounts to withdraw at least a certain amount each year so the government can collect their taxes.
Of course, I always want to mention you’re always allowed to take more than what the IRS is calculating in what you’re going to see today but this is the minimum that you need to take. And it’ll be based on a percentage and that percentage is going to change each year. You’re going to see that table here in just a bit but I want you to understand generally how the RMDs work and what the concept is here.
For most people, certainly the people who are on this call, your RMDs will begin around the age of 73. It used to be, for ages, it was 70 and a half, now it’s 73 and so we’re going to try to make this a little easier for everybody to see what the consequences are.
When do RMDs start?
Remember, there were some changes the ages of when RMDs started. If you’re on this call right now and you haven’t turned 73 yet, then your RMDs are going to be age 73, if you’re still working and you haven’t reached that age yet. The way the IRS says it is, for those people turning age 72 in 2023 or later, your TSP RMD start age is 73 and you must take that RMD by the later of these two dates and time, either April 1st of the year following the calendar year in which you reach age 73 or April 1st of the year following the year you retire from government service. Again, whichever is later.
I do want to make a special note here, this April 1st thing only applies to the very first time you take RMDs. If you wait until April 1st of the following year, as described in these bullets above, if you wait until April 1st to take your first RMD, you’re also going to have to take another RMD for the current year you’re sitting in by December 31st which means you’re going to have two RMDs in one tax year.
Let’s say you’re turning age 73 here in 2024 and you know that, next year, you are going to have to take RMDs. It’s really this year that you have to take them because you’re turning 73 in this tax year but the IRS is giving you a little bit of time till April 1st of 2025 to take the money out. It’s a little bit of a grace period, if you will. But what they’re not telling you or maybe isn’t all that clear is that you’re also going to have to take your 2025 RMD in 2025, that’s by December 31st.
You don’t get to keep going until April 1st of the next year every time, that’s just the very first year that you’re going to be able to take it. You want to be really careful. If you’ve got the wherewithal that you know, in the year in which you turn 73, by December 31st, you really should have gone ahead and taken your RMD, barring any good tax reason not to do so, then you want to get that done by December 31st so that’s in the current tax year.
By the time you move to next year, you can take your new RMD and you’re only going to have one per year. Hopefully that’s helpful from a timeline standpoint. I know the IRS does not always write things in a very clear manner and we try to be as specific as we can with respect to what the IRS is stating so that everybody’s on the same sheet but, boy, this can be confusing.
How is the RMD calculated?
Overall, the RMD is based on two important things. The first is your prior year’s account balance. It’s only going to look to the traditional side of your TSP, that was a big change that happened this year so that’s good. Doesn’t include the Roth side but just the traditional side of your TSP is going to be included in this calculation.
The second part is how old you are and how it relates to your life expectancy as far as the IRS is concerned. That life expectancy, they’re going to use this thing called the Uniform Lifetime Table and it ultimately yields a percentage of your account that you have to take. I’m not going to bore you with the details of how we come up with those percentages because most of you don’t care, you just want to know am I taking the right amount and so that’s what we’re going to show you today.
IRS Required Minimum Distribution Calculations
At 73, the first year you have to take RMDs, the IRS is going to require you to take 3.77% of your account. The next year, that percentage goes up and, the next year, that percentage goes up and it continues year over year over year that you are being required to take a larger and larger and larger percentage of your account.
I don’t have a slide for this but I want to just speak real briefly to the 4% rule that many of you are familiar with. And for those of you who aren’t or just a quick refresher, the 4% rule is essentially this concept that, as long as you have a properly balanced portfolio, you can take 4% a year from it for the rest of your life and never run out of money. That’s the idea. Now, we’re not talking about some crazy performing portfolio, we’re talking about a well-balanced, I’m not going to go into the details of that, but I want you to think about that 4%.
This concept has been debunked a little bit more lately and most folks on the investment side of the world are more inclined to be at 2.5 or 3% of that safe withdrawal rate that they’re sharing with their clients. This 4% rule is aggressive, it’s a pretty high number, a high percentage to take out of your account but, in RMDs, you’re already starting at almost 4%.
The IRS legitimately wants you to deplete your account because they want to be paid their taxes, and it was part of the deal. We can’t be too mad, it was part of the deal that you got when you elected to contribute to a tax deferred account. You are now telling the IRS, by the time you get to 73, if you haven’t taken all that tax deferred money out, they’re tapping their watch like, “All right, it’s time. It’s time to go, it’s time to start taking some of that money so that you can pay your tax on it.”
They’re not telling you you have to spend the money but they are telling you you have to take it out of your account so that you can pay the tax on it. You’ll notice, as you get older and older, huge swaths of money are coming out. And listen, you might need every bit of this money that’s coming out and, if that’s the case, then RMDs will be no big deal to you.
But if you’ve been a good saver and a good investor over a long period of time and you have more substantial accounts, you might very well not want to use all of this money. You might have it in your head that you’d like to pass some of it to more of your heirs or do something amazing with it when you die and that you don’t actually need it while you’re living but the IRS isn’t on board with that plan, they want you to take these percentages of your account out every single year as you age in retirement.
How is the RMD taxed?
We know you’re going to have to take money out but how is it going to be taxed to you? Well, any money that you take out of a tax deferred account is going to be taxed as ordinary income. And although I didn’t describe it here on the slide, I do want to make just a verbal comment about this and that is ordinary income is different than earned income.
Earned income is likely most of what you have right now where you have a job and you are earning a paycheck, that’s normal earned income. But ordinary income takes, not only what you get from a job, so those are wages, but it also adds to that any accounts that you take money out of like the traditional TSP because you owe tax on that money and that tax is going to be called or it’s going to be based on that ordinary income.
There are three really important things that I want to cover, we’ve got a slide for each one of these or, actually, a couple of slides. The first is that taxable income, that ordinary income that’s coming to you from these RMSs may very well cause you to move into a higher tax bracket, it can cause more and more of your social security income to be taxed and it can cause your Medicare premiums to be higher, higher than the average person who’s enrolled in Medicare. We’re going to dive into each one of these.
Current Tax Brackets for 2024 (due in 2025)
Tax brackets are never fun to talk about but here we are. The 2024 tax brackets, this is the tax that you owe on income that’s in 2024, it would be due in April of 2025. Just so we’re really clear on what bracket style we’re looking at here. These aren’t the taxes you just pay, these are the ones you’ll pay next year. Depending on where you fall in here, you may very well find that money that you did not actually need from your TSP account, for instance.
Let’s say you’re married filing joint and you’re at the 12% tax bracket, you’re right at the top of the bracket, maybe it’s 92, $93,000 a year and now you have an RMD, you’re going to have to take a big percentage of your account out and that’s going to push you over that threshold so now you’re going to be in the 22% tax bracket, not the 12% tax bracket.
I’m not suggesting that all of your income gets taxed at the 22% rate, it won’t, it’ll just be the overage so any of the income that you have from 94,301 and above in our example here. But we want to be mindful of where you are on the bracket so that you know how much room you have left before you’re taxed at a higher level. RMDs, especially when you have larger accounts and you get to those higher and higher percentages, it may very well cost you a lot, not just in loss of growth on that money, but now it’s considered taxable income that we have to account for.
The Effect RMDs Have on Social Security
The income and tax filing status will determine whether and how much of your social security benefits are going to be taxed. In all fairness, most of you will have the full amount, the highest level of tax on your social security benefits. And you’ll see why here in just a moment because you’ve got this nice pension.
Whether you think it’s nice or not, I promise you it’s way better than anybody gets in the private sector these days. Specifically, the income that the IRS is looking at is called your provisional income and you might not have even heard of that phrase before. For those of us geeks that work in this kind of language all the time, it’s an interesting thing.
Essentially, the IRS takes your gross income, that is a paycheck if you still are earning a paycheck, any pension money, any traditional TSP or traditional IRA money that you’re getting, those types of accounts, they’re going to add that to any tax-free interest that you’ve earned.
You don’t owe tax on that interest but it’s going to be counted here in this funny calculation. We’re going to take half of your social security amount and add it to this number. Those three things added together, if that level exceeds a certain level that you’re going to see on the next slide, some or more of your social security benefits will be taxed.
Determining How Much of Your Social Security is Taxed
Remember, it has to do with the filing status that you have and your provisional income level. Let’s say you’re a single person and you have a provisional income level, we know it goes from $0 to $25,000, $25,000 to $34,000 and so on, and let’s say you’ve got a pension that’s at $24,000 a year but now you have money coming out of the TSP that pushes you into that $25,000 to $34,000 range.
At this point, that caused your social security benefit to be taxable to you, half of your social security benefits will be considered taxable income. And you’ll see that, if you have relatively low income in retirement at $0 … You’re going to be taxed at 0% on your social security benefits.
But most of you, when we’re running all these reports for feds and we’re getting all these pension numbers, we’re probably exceeding this $25,000 and, certainly, for a joint, a couple, we’re probably exceeding $32,000. Pension, half of your social security, anything you’re taking from the TSP, the supplement, all of those pieces all count in this. And so, we have to really be looking at the bigger picture and that is ultimately going to determine what percentage of your social security benefits are reported as taxable income to you.
The Effect RMDs Have on Medicare Premiums
Medicare Part B is the part of Medicare that looks most like your FEHB plan. This is the one where it’s the doctor’s visits, it’s some preventative care, it’s those types of things that are normal medical care. It’s not hospitalization, that’s Part A, but Part B is normal Medicare and it’s what we call means-tested.
They’re essentially going to say, “Well, how much money does this person actually make? Should they pay more for this coverage?” It is going to be essentially determining, based on the income that you have, the more the income, the higher the premium you’re going to pay. You’re going to see the table here in just a moment. But it is important to realize that, not just your RMDs, but anything you take out of TSP can affect this number.
Anything you’re taking out of traditional TSP and I would add in there traditional IRAs, 401(k)s, if you have those, if your spouse has those, those are all going to count in this number. This premium increase, this extra amount that you have to pay for Medicare Part B, if you trip this wire, is called the income related monthly adjustment amount or what we refer to as IRMAA.
The actual amount that you’re going to be paying will be based on your modified adjusted gross income from two years ago. For 2024 Medicare premiums, we’re going to look back to your 2022 MAGI. Here we go, hang on for the ride here.
Your Income Determines Your Part B Medicare Premium
To determine someone’s 2024 Medicare premium, we’re going to look back two years to 2022 and, based on how you filed, we’re going to see where you fall. Individual, so a single person, joint, married and separate, wherever your income falls on here based on your tax filing status, look to the far right-hand side and that is how much you will pay for your Medicare Part B premium.
Again, this might be RMDs, this might be just normal income that you’re taking out of TSP but all of that is going to count in this number. If you decide you’re going to take $200,000 out of your account to go pay off your house or do something crazy, it is going to affect your Medicare premium two years from then.
We want to be super, super careful here. And of course, RMDs are going to play a role in this as well, of course, not until you’re 73 and we want to have this in mind as we’re thinking about extra costs that get triggered because we have to take more out of the TSP account.
Again, if you already needed that money from the TSP, then RMDs will be no big deal to you. But if you didn’t need the money, if you had other sources of income that could keep you under these limits, maybe you have Roth money that you’re taking or you’ve got non-qualified money that you’ve already paid tax on that you’re using, that’s all fine.
But, man, once you start taking it out of a traditional account, it starts to become much more expensive to you, not just in the tax that you pay, but other triggers like this that cause you to pay more for things that you otherwise wouldn’t have had to pay as much for.
What happens if you have multiple TSP accounts?
About a third of the federal workforce are veterans and it stands to reason that many of you have multiple TSP accounts. You have your federal TSP and you have your military TSP and I need you to know that RMDs are required on each one of those accounts separately. And although the TSP has made it easy and made it look like you have two accounts with them, you do but they’re looking at you as two different people.
Every one of those accounts you have requires you to take money out of when you get to that 73 mark. Here’s the deal. Many times, we have federal employees who are still working on the federal side when they hit this RMD timeframe, hopefully, it’s because you absolutely love the work that you do and the people you do it with and for and not that you’re stuck in federal service.
But if you’re 73 and you’re still working in the government, in the federal government, you don’t have to take your RMD on your federal TSP just yet but you will on your military TSP because you’re no longer employed there. We have to make sure that we’re looking at these accounts separately even though it looks like all of this is under one account at the TSP.
It is also important to know, let’s say you’re retired from both the military or separated from the military and you’ve separated from federal service and now you have these two TSP accounts, taking an RMD out of one does not satisfy the RMD on the other. You can’t pick and choose, you have to take it out of each one of them based on the percentage of the account for that year.
How are TSP RMDs Different Than for IRAs?
In private sector accounts like traditional IRAs, the IRS allows participants to essentially calculate all of the RMD for all of the accounts together. We just add up all the account values, apply that percentage and then choose which account to take it from. You could take it all from one, you could take it all from the other, you can mix and match, you can do all of that and the IRS allows that when it comes to traditional IRAs.
However, when it comes to 401(k)s like the TSP, the IRS mandates that you take that RMD from that account, they’re taken separately. You calculate that all by itself, your traditional TSP on the federal side and the military, frankly, and you are going to apply that percentage and you must take that amount from your TSP. You can’t say, “Well, I took plenty out of the IRA that I have,” that doesn’t count. Not in the eyes of the IRS and not in the eyes of the TSP. We have to make sure that money comes out of this account specifically because it does not work like private IRAs.
Required Minimum Distributions (RMDs)
I want to show you what this actually looks like comparing the TSP to the private side and we’re going to show what things look like at age 73 when someone has to take their very first RMD.
On the far left-hand side, if we look at that traditional TSP, let’s say you have $100,000 in there just to make our math really easy, we know that you have to take 3.77% out of your account if you remember that from the very first table that we looked at showing you the breakdown, 3.77% of $100,000, $3,770 and you must take it from that TSP account.
But if you had that same hundred thousand split in two different IRAs in the private sector, so still a hundred thousand but it’s split in two different accounts, the total RMD requirement is the same.
It’s still the $3,770 but now you have a choice of which account to take it from. You could split it between the two, you could say, “Hey, one is really aggressive and it’s performing really well, I want to take it out of that one and not the one that just tanked.” You have lots of choices out there but you do not have those same choices within the TSP.
I want to be very clear because I don’t want anyone to be confused when you go read the normal rules for RMDs and realize that they don’t quite match up. It’s also worthwhile to look to the very right-hand side of the screen to realize that, if you had money in the Roth TSP or a Roth IRA, there are never RMDs on these accounts.
This rule just changed for the TSP this year, in 2024. This was a welcome change that was finally made, I’m so glad that they did. It used to be that RMDs were required on the Roth portion of the account, which was crazy, but now that is no longer the case.
You might be wondering, “Hey, I have traditional money, could I make it Roth money?” We’ll talk more about that here in just a bit but what a cool perk that your money gets to grow tax-free and you don’t have to take that money out of your account if you don’t wish on the Roth TSP and the Roth IRA side.
How can someone avoid RMDs?
The easy answer is don’t have any money in tax deferred accounts. That’s not really the best answer but, if you legitimately do not want to have required minimum distributions, you should not have money in traditional IRAs, TSP or 401(k)s.
I know that is unrealistic and it is unavoidable for FERS employees because, by your very nature of the type of employee you are and the way in which your agency contributes to your TSP account with either the automatic contribution or any match, you always will have a traditional side of your TSP. The question is how do you manage that so that you get to control what is happening on the RMD side.
I’m not going to go into this Roth conversion concept, we actually did this on the webinar in March and so I would highly encourage you to go back and listen to that webinar. I talk all about Roth conversions and how that works and this idea that people have like, “Hey, I’ve got this traditional TSP, how do I make it Roth so it grows tax-free and I don’t have any RMDs on it?” and that’s exactly what we’re talking about in that webinar.
So, we’ll link to it so you’ll be able to see that. It’s open for you to go listen to the replay, you don’t need to do anything special, you can just go watch the video.
But what happens if you legitimately do not need the money?
Listen, the IRS doesn’t care, you still have to take it. Because, remember, the R in RMD stands for required so this is not optional for you, you have to take it.
If you’ve got money in tax deferred accounts and you’re 73 or older, you’re going to have RMDs. If you have to take RMDs that exceed what you actually need, now you have money that you had to pay tax on that’s now sitting in, say, a savings account, you didn’t necessarily need to spend it but you had to take it out of the account, now you’re going to pay more in taxes than perhaps you needed and you’re naturally going to deplete your account faster because you’ve now taken the money out of the account so it’s not working for you anymore.
It may or may not be sitting in another account that you’ve established like a savings account but the account that you are trying to let grow for a long period of time is now going to be eaten away by these RMDs because you have to take such a high percentage of the account to satisfy the RMD. And it goes without saying, if you are forced to take money out of the TSP or any account, when the marketing conditions are not good … Right?
Say we just had a market, we’ll say correction, that’s what all the pros say, right, where the market tanked, then that’s not a great time to sell your shares, to cash them out. We know we want to buy when the shares are low and sell when they’re high but, if you’re forced to do the exact opposite, you now have to sell a lot of shares to get the dollar amount out that you need if the value of them is not very high.
It’s important to realize that, in the course of your retirement, you’re naturally going to have some bad times in the market and, depending on how aggressive your portfolio is, those swings of going up and down may not feel very good when you need to take the money out especially if you’re forced to take the money out against your will. But that’s part of the rule, right? That’s part of the agreement that we had with the IRS when we decided to go on these tax deferred accounts.
Next up and we’re continuing on this line of what happens if you don’t need the money. Before you get any wild ideas, I’m going to answer a couple of questions that we get pretty regularly. The first is, no, you cannot roll over the amount of the RMD to another account. You can’t say, “Well, I have it in the traditional TSP, let me roll it to a traditional IRA.” No, you’re still going to have an RMD on that account because we have to move it to a similar account style.
If you were to move it to, say, your savings account, you still took it as income and paid the tax on it and then, at that point, you can do with it what you wish but, keep in mind, in order to contribute to an IRA, you have to have earned income, you have to be working. If you’re not working at 80 years old when you have this brilliant idea, you are not able to now put that money into a new account or add it to an existing account. It doesn’t quite work that way.
Next thing I’ll answer is, no, you cannot apply a prior year’s distribution to a future year’s RMD. Let’s say, one year, you had to take out a whole bunch of money.
Maybe you started a new business, maybe you bought a property, maybe you paid off your house, whatever reason it is that you took the money out of the account that was far and above the RMD but you had a lot that you took out, you can’t hold over and say, “Oh, well, I’m going to apply this excess amount that I took to future years RMDs.” It doesn’t work that way, the RMD must be taken each and every year based on that prior year’s account balance and your age.
Last thing that I’ll answer is why, yes, the TSP does know if you satisfied your RMD or not. And if you didn’t, they’re going to push out a payment to you. And I’ll tell you, as much as we don’t love maybe someone messing with our account and sending us money when we didn’t ask for it, the reality is that, if you were in the private sector and you failed to take your RMD, nobody’s going to come knocking on your door and say, “Hey, hey, don’t forget, don’t forget, you got to take this.”
If you have a financial advisor, they’re going to be all over you but, if you just have your stuff out in an IRA and then you’re managing it yourself, you’re maybe going to forget. If you forget to take your RMD right now, the penalty is 25%. You’ve got to pay tax on the whole amount even though that 25% of it was assessed as a penalty to you or an excise tax.
However, we want to call that, that’s a penalty. It’s great that the TSP doesn’t even allow you to get into the penalty window or the penalty box, so to speak, they’re just going to push it out, whether you like it or not, to make sure that they satisfy the IRS and you don’t end up suffering that penalty.
Do my beneficiaries also have RMDs?
When you die and you decide to leave your TSP to your named beneficiaries or even your unnamed beneficiaries, if you didn’t name anybody, there’s a normal order, it goes to your spouse, then your kids and so on, but whoever those beneficiaries are, they will have RMDs on the amount that they inherit.
And the amount of the RMD and the timing of when they have to take them will largely be determined by the kind of beneficiary that they are. Are they a spouse, a non-spouse or an entity or what the IRS refers to as a non-individual. This would be a trust, a church, a charity, something where you have left money to a non-person.
I thought about going into the rules of all of these and, as I was building all of the slides, I thought, “Good grief, this is too much to try to explain,” so I’m simply going to leave it here. When you leave money to other people from your TSP account, they will have required minimum distributions because this last bullet is 1,000% true and that is the government wants their money, period.
Whether they get it from you, whether they get it from the people that you left your money to, they don’t care, they want to be paid. It was part of the agreement. We have to remember that even when we’re irritated that we have to pay those taxes, we have to remember that was part of the arrangement that we agreed to when we decided to go into these tax deferred accounts.
Some Notables
A couple of takeaways or notables for you today. The first is that taking required minimum distributions is non-negotiable. If you have tax deferred accounts, you’re going to have RMDs. Your proper handling of these RMDs will help you to be more in control of your tax liability. If you just put your head in the sand and let everything happen to you, you’re going to have no control.
But if you are smartly handling these RMDs and you have your eyes wide open to what it’s going to cost you tax-wise, how it might affect your Medicare premium, social security taxability, all of those pieces that we talked about today, then you’re going to be in pretty good shape, at least better shape than the person with their head in the sand.
And if we can really appreciate and understand how those RMDs affect other benefits that are seemingly unrelated, who would’ve thought that RMDs or even taking money out of the Thrift Savings Plan in general would affect how much you owe for your Medicare Part B premium or how much your social security is taxed, those are seemingly unrelated but, in the eyes of the IRS, they’re absolutely related and we have to be really aware of how those things work so that we can be more in control if we wish.
If you have several years before you begin your required minimum distributions, so let’s say you’re in your 60s and you say, “You know what? I might work for another couple years, maybe I’m about ready to go, is there anything I can do between now and the time I turn 73 and RMD start? Is there anything I can do to start reducing the tax deferred accounts that I have and start considering those strategies like the Roth conversion?”
Wrap Up & Next Steps
Again, I highly encourage you, go back and listen to that webinar, it was a lot of fun, there were tons of questions that came in. In fact, the webinar timed out before we could even get through all the questions that people had submitted, it was crazy but it tells me that you guys are paying attention to the tax problem that is looming ahead and I so appreciate that.
Definitely, if you are thinking about how do I get out of this RMD process and how do I maybe not pay as much tax in retirement, how does this work, please go check out that webinar. It’s the tax train, Tackling the Tax Train, the TSP Roth Conversion, so please go watch that and I think you’ll earn a great deal.
You guys know, we love this stuff, we gobble it up and, as much as I would love to say that RMDs are the end of the decisions that you’re going to need to be making in retirement, I would be lying. The reality is there’s a whole bunch of decisions that you have to make leading up to retirement, at the point of retirement and then well into retirement that you need to be prepared for.
In order to help feds get a broader picture of what is going on and what are all these crazy decisions that I need to make, we do offer in-person training, there is no cost for you to attend. These are sponsored sessions that are held in the local communities throughout the country, we’re even in Hawaii, Alaska, Germany, all over the place because we want to cover all of these federal benefits and these decisions to be made.
And frankly, a lot of agencies simply aren’t putting this type of training on for their employees’ benefit and we want to make sure that that’s available to you. And my favorite part of all of this is that there’s one-on-one help available after the session.
Because, most of the time, especially if you’ve ever attended a retirement workshop before, most of the time, at the end, you’re like, “Great, but how does this apply to me? What about my numbers? What’s my situation going to look like?” And that’s really hard, if not impossible, to do in a classroom setting. You need to be talking one-on-one with someone who can look at your actual documents and your situation to be able to give some perspective.
That is available to every employee who attends the retirement workshop. You can find all of the details, so the locations, the dates, all that at FedImpact.com/attend. I strongly encourage you, find a workshop. If it’s been a little while since you attended either another workshop or even one of ours, please get back through.
Sometimes we need a couple of passes at this material and, as much as I’d love to believe that it’s really easy just to let all this stuff sink into your brain, it’s not, there’s a lot going on here and don’t be ashamed. If you just need a little bit more time with this material and to soak it all in, please come back and you’ll hear things from a different perspective now from when you originally heard it.
Thank you all so much for joining us, I hope that you’ll stay nice and connected to us. We send out quite a bit of content on federal benefits, we want to try to keep you in the loop on how these things work and offer up some different perspectives.
Please, to find a workshop, go to FedImpact.com/attend, that is, by far, the very best way for you to get that big picture starting point for those discussions so that, when you’re sitting one-on-one, you have everything that you need to have a very productive and fruitful conversation. And of course, you can access the next webinar and all of the webinar replays at FedImpact.com/webinar. Thank you all so much. We’ll see you next time.
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