TSP Withdrawal Expectations in 2019

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Long awaited changes to withdrawal policies for TSP will allow more flexible options thanks to the TSP Modernization Act signed into law November 2017. This law allows a two-year window for the TSP to implement the changes, which must be completed by November 2019. The changes require massive revisions to TSP recordkeeping, forms, publications, TSP website, and training.

TSP participants are excited about these changes, especially those approaching retirement or in retirement. Sign up for TSP email notifications to stay up to date on new information. The most recent TSP Fact Sheet (5/2018) on upcoming withdrawal changes is available by clicking here.

Once the new withdrawal policies go into effect, you will have more options for accessing your money from your TSP account.

Here is a quick recap of what you can expect:

Partial Withdrawals

  • New policy will allow for multiple age-based (age 59 ½ and over) in-service and post-separation partial withdrawals. (Currently only one partial withdrawal is allowed whether it is in-service or in retirement). Under the new law, you will be able to take up to four age-based in-service withdrawals per calendar year.
  • There will be no limit on the number of partial withdrawals you can take after separating from service (except no more than one every 30 days).
  • You will be able to take partial withdrawals while you’re receiving monthly installment payments

Roth, Traditional or Both

  • You will soon be able to choose whether your withdrawal should come from your Roth TSP, your traditional TSP, or a mix of both. This is GREAT news to allow for more efficient tax planning in retirement! (Currently, all withdrawals come out proportionately from traditional TSP and Roth TSP).

Installment Payments

  • As a retired TSP participant, you will be able to not only choose monthly payments, but you will also be able to choose quarterly or annual payments. You will also be able to stop, start, or make changes to your installments at any time. (Currently the only option you have for installment payments is monthly, and you can only change the payment between October 1st to December 15th, for the following year).

Withdrawal Deadline

  • You will no longer have to make a full withdrawal election after you turn age 70 ½ and have separated service. You will still need to make your IRS required minimum distributions (RMDs). (Currently, the TSP requires that you make a full withdrawal election after you turn 70 ½ and have separated service. If you fail to establish a full withdrawal, TSP initiates the “abandonment” process.

FedSavvy will continue to track the progress, and TSP assures that once they know the exact date the changes will go into effect they will announce it widely, through the TSP website, social media and email.

Carol Schmidlin is an Investment Advisor Representative offering investment advisory service through Global Financial Private Capital, LLC, (“GFPC”) and a Registered Representative offering securities through GF Investment Services, LLC. (“GFIS”). FedSavvy nor Franklin Planning are affiliated with GFPC or GFIS

 

The TSP Modernization Act Policy Changes

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There is a lot of excitement about the coming changes to the TSP withdrawal options. Please join us for a review of what the changes are, what they mean to you and common questions TSP participants have. There will be plenty of time during this call for Q & A.

Tue, Jun 26, 2018 12:00 PM – 1:00 PM EDT

To access the Live Webinar, click here

If you experience problems registering, please email natalie@franklinplanning.com or call (856) 401-1101

For those of you who can’t participate on the computer and would like to call in, let us know and we will send you the slides so you can follow along! Or contact Natalie Meglino at natalie@franklinplanning.com and request to be registered.

Annuity product guarantees are not offered by Global Financial Private Capital, LLC or GF Investment Services, LLC.

Tax-Efficient Retirement Strategies

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With the threat of higher taxes looming in the future, the need for tax-efficient retirement planning may be more valuable now than ever before. Although we alone can’t fix the 21 Trillion and growing National Debt, there are opportunities to utilize tax-efficient strategies to reduce your tax burden in the future.

Tue, May 15, 2018 12:00 PM – 1:00 PM EDT​

To access the Live Webinar, click here

 

5 Roth IRA Facts That May Surprise You

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Do you think you understand all the rules that govern your Roth IRA? Not so fast! There are many misconceptions as to how these complicated accounts work. Here are 5 Roth IRA facts that might surprise you:

1. You are never too old to contribute. If you have earned income and your modified adjusted gross income is below a certain level, you can contribute to a Roth IRA. Your age does not matter. This often comes as a surprise to taxpayers because you cannot contribute to a traditional IRA once you reach the year you turn 70 ½. Roth IRAs are different. Age is never a barrier to making tax year contributions.

2.Your participation in an employer plan does not prevent you from making a Roth IRA contribution. Do you have a 401(k) at work? If you are concerned that participation in your employer plan makes you ineligible to contribute to a Roth IRA, don’t be! You can max out both. But what if your employer plan is Roth 401(k) plan? No worries! You can fully fund a Roth 401(k) and a Roth IRA for the same year.

3. Almost anyone with a traditional IRA can convert it to a Roth IRA. There used to be restrictions on conversions due to income or tax filing status. These restrictions went away back in 2010, opening the door to conversion for almost any taxpayer who owns a traditional IRA. The only exception would be traditional IRA beneficiaries. Unfortunately, conversion is not available for those beneficiaries.

If you haven’t converted, this might be the year for you to make that move. You will want to discuss your situation with a knowledgeable tax or financial advisor. Just because everyone with a traditional IRA can convert, does not mean that they should. Conversion is not one size fits all.

4. You can always access your contributions tax and penalty free. Are you avoiding contributing to a Roth IRA because you are worried you might need that money? Don’t let this fear stop you from making that Roth IRA contribution. Your tax year Roth IRA contributions are always available to you tax and penalty free regardless of your age and what you intend to do with the money. More good news is that the rules for Roth IRA distributions are very taxpayer friendly. Your contributions are not only always accessible tax and penalty free, they are also considered to be the first money distributed from your Roth IRA.

5. You don’t ever have to take distributions from your Roth IRA, but your beneficiaries do. During your lifetime, distributions are never required from your Roth IRA. Roth IRAs are not subject to the required minimum distribution (RMD) rules that apply to traditional IRAs while you are alive. Your money can grow tax-free for your entire lifetime. Your beneficiaries will have to take RMDs from the inherited Roth IRA. That is the bad news. However, the good news is that these distributions will almost always be tax and penalty free.

Spring Cleaning Tips for You Financial House

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Before you start your Spring cleaning make sure you have a plan so you will know how to proceed. Learn how to identify your comfort level with risk so that your investment allocations align with your comfort level. Learn about proactive strategies you can do today to reduce your tax bill in the future. We will identify additional items that you will want to check off from your cleaning list.

Tue, Apr 17, 2018 12:00 PM – 1:00 PM EDT

To access the Live Webinar click here

If you experience problems registering, please email natalie@franklinplanning.com or call (856) 401-1101

For those of you who can’t participate on the computer and would like to call in, let us know and we will send you the slides so you can follow along! Or contact Natalie Meglino at natalie@franklinplanning.com and request to be registered.

Annuity product guarantees are not offered by Global Financial Private Capital, LLC or GF Investment Services, LLC.