My Age is 70½ — Now What?
Many of our clients don't have a good grasp on what happens at age 70½ under
government regulations with regard to IRAs and "employer sponsored" retirement
programs such as the Thrift Savings Plan (TSP) or 401(k)'s:
Federal Retirement Seminars
Since 1980, Personal Benefit Financial (PBF) has conducted more than 750
federal government retirement seminars in nearly all 50 states.
PBF seminars are taught by qualified instructors with:
- combined federal government seminar experience of more than 52 years
- experience in almost every government agency
PBF Seminars not only cover the most important information on federal
retirement benefits -- such as CSRS/FERS, Social Security and the Thrift Savings
Plan -- but more importantly they provide:
- clear instruction of what to do, and what not to do
- risk protection plans to protect retirement assets
To learn more about holding a retirement seminar
at your office,
- The law indicates owners of traditional IRAs and TSP and 401(k) participants
must start withdrawing from those accounts the year the participant (owner)
turns age 70½ or April of the year following the 70½. This is the
Required Minimum Distribution (RMD) that we all must begin. There are two
issues of consideration:
- If the TSP or 401(k) participant is still working, the withdrawal is
not required. However, the IRA account holder must withdraw even if working.
- If the individual elects to delay the first withdraw to April 1 of the year
following, that person must take two withdrawals in that year.
- While the account holder is in their 70s, the Required Minimum Distribution
(RMD) withdrawal is in the 4% to 5% range of the account values on December 31
of the previous year. For example, if the individual is age 72 in 2013,
the account values would be as of December 31, 2012. There is a IRS
RMD table that is used with the account balance to annually determine the factor
for the withdrawal calculation.
- The penalty for not withdrawing or withdrawing incorrectly is 50% of the
amount that should have been withdrawn.
- The values of all IRAs accounts can be accumulated, and the withdrawal can
be taken from only one of the IRA accounts, if desired. This is not so, however,
with the TSP and 401(k) plans. The necessary total withdrawal for TSP and 401(k)
plans is calculated on the total value of all those plans, but the withdrawals
must come from each plan.
- The TSP will only allow one partial withdrawal in a lifetime. Therefore, the
first required withdrawal could come from the TSP; but thereafter, the required
withdrawal could not be taken in a lump sum TSP.
- Roth IRA's have no requirement to withdraw; the Roth TSP does require a
withdrawal. The Roth TSP, however, could be rolled into a Roth IRA to
solve that issue -- with no penalties, fees or taxes.
About the Author
L. Ronald Blair is a Certified Financial Planner, Chartered Property Casualty
Underwriter, Accredited Asset Management Specialist, Certified Senior Advisor,
Registered Financial Consultant and owner of Personal Benefit
Seminars located at 870 Kipling St #A Lakewood, CO 80215 -
Tel: 303-238-5123. He is also a registered representative with Royal
Alliance Associates Inc., member FINRA/SIPC.
Sharla Rountree, CFP® and L. Ron Blair, CFP®,
AAMS,offer Securities and Advisory Services through Royal Alliance Associates,
Inc., Member FINRA/SIPC . In this regard, this communication is strictly
intended for individuals residing in the states of AK, AR, AZ, CA, CO, CT, FL,
GA, HI, IA, ID, IL, IN, KS, MD, MN, MO, NC, NH, NM, NV, NY, OH, OK, OR, PA, SD,
TX, UT, VA, VT, WA, WY. No offers may be made or accepted from any resident
outside the specific state(s) referenced.