As we approach the end of the year, time to go over required minimum distributions (RMDs) and how the SECURE Acts 1.0 and 2.0 changed the IRS penalties and rules.

FedLife Podcast (ep. #107): Understanding RMDs for the TSP and IRAs
In this episode, Dan and Ed discuss what federal employees need to grasp when it comes to taking RMDs from their qualified retirement accounts – including beneficiary or inherited IRAs.

Featured in this episode:
• The Required Beginning Date for RMDs
• Excess accumulation penalty
• Beneficiary IRAs – do you need to take an RMD?
• The impact of the two SECURE Acts
• Remember no more RMDs for the Roth TSP
• QCDs and the Qualified Charitable Distribution deadline
• Higher tax brackets and how they affect feds’ financial plans
• The impact of the 2017 Tax Law’s expiration
• Roth conversions at the end of the year

Source Article:

Connect with Dan Sipe:
• Dan.sipe@stwserve.com
• LinkedIn: Serving Those Who Serve
•
• Twitter: Serving Those Who Serve
•
• Facebook: Serving Those Who Serve
•
Youtube: Serving Those Who Serve – youtube.com/fedlife…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

Required Minimum Distributions (RMDs) are an important aspect of retirement planning for individuals with tax-deferred retirement accounts such as the Thrift Savings Plan (TSP) and Individual Retirement Accounts (IRAs). RMDs are the minimum amount that must be withdrawn from these accounts each year once the account owner reaches a certain age. Failure to take RMDs can result in significant penalties, making it crucial for account holders to understand and comply with the RMD rules.

For TSP accounts, RMDs are required to begin at age 72 for those born after June 30, 1949, and at age 70 ½ for those born before July 1, 1949. The amount of the RMD is based on the account balance and life expectancy factors. The TSP provides a calculator for account holders to determine their RMD amount each year. It’s important to note that while RMDs are required for traditional TSP accounts, they are not required for Roth TSP accounts during the account owner’s lifetime.

Similarly, RMDs for traditional IRAs also begin at age 72 for those born after June 30, 1949, and at age 70 ½ for those born before July 1, 1949. The RMD amount is calculated using the account balance and life expectancy factors. For those with multiple traditional IRAs, the RMD for each account can be calculated separately, but the total amount can be taken from one or more of the accounts. For Roth IRAs, RMDs are not required during the account owner’s lifetime.

It’s important for individuals to plan for RMDs as they can have significant tax implications. The withdrawn amount is generally subject to ordinary income tax, so account holders should be prepared for potential increases in their tax liability. However, there is a provision that allows individuals to make qualified charitable distributions (QCDs) from their IRAs, which can satisfy some or all of the RMD amount while also excluding the distribution from taxable income. This can be a beneficial strategy for those looking to support charitable causes while minimizing their tax burden.

It’s crucial for TSP and IRA account holders to keep track of their RMD deadlines and ensure they are withdrawing the correct amount each year. Failure to take RMDs or taking less than the required amount can result in a significant penalty of 50% of the amount that should have been withdrawn. The IRS provides resources and guidance to help individuals understand and comply with the RMD rules, but it’s also wise to consult with a financial advisor or tax professional for personalized advice and assistance.

In conclusion, Required Minimum Distributions are an important aspect of retirement planning for holders of tax-deferred retirement accounts such as the TSP and IRAs. Understanding the RMD rules, calculating the correct amount, and planning for the tax implications are essential to avoid penalties and ensure a smooth retirement transition. By staying informed and seeking professional guidance when needed, individuals can navigate RMDs with confidence and make the most of their retirement savings.