Thread: Required Minimum Distribution (RMD) Question

Hi Milehghcty. Hopefully someone who knows will chime in. I just wanted to say hey and welcome you after your first post - even though you've been a member for 15 years already.

For now, here is ChatGPT's response to your question:

The Thrift Savings Plan (TSP) and the IRS have different methods for calculating Required Minimum Distributions (RMDs), which can lead to discrepancies in the estimated amounts. Here's why you might be seeing a difference between the TSP estimate and the IRS RMD tables:

Assumed lifespan and calculation method:
The TSP may use a different assumed lifespan or distribution calculation method than the IRS. The IRS typically uses the Uniform Lifetime Table to calculate RMDs, which considers the account holder's age and life expectancy. TSP might use a different actuarial table or methodology that results in higher RMD amounts.

Withdrawal options:
The TSP might offer different withdrawal options or methods than those prescribed by the IRS RMD tables. Certain withdrawal methods might result in higher distributions than those calculated using the IRS tables.

Account-specific factors:
The TSP might take into account specific factors related to your account, such as the type of TSP account you have, beneficiary designations, or other unique circumstances, which can impact the calculated RMD amount.

Updates and changes:
IRS regulations and tax laws might change over time. The TSP and the IRS may not always align their methodologies, which could lead to variations in the RMD estimates.

Frequency of calculation:
The TSP and IRS may update their RMD calculations at different intervals, leading to differences in the estimated amounts.

To ensure that you're complying with the IRS RMD requirements accurately, it's essential to use the IRS RMD tables and guidelines for your specific age and account balance. The IRS tables are widely accepted as the standard for RMD calculations, and they are used by most retirement account providers to determine RMD amounts.

If you're concerned about the difference in RMD amounts between the TSP estimate and the IRS tables, you should consult with a financial advisor or tax professional who can review your specific situation and provide guidance based on the most current regulations and IRS guidelines. They can help you navigate the requirements and plan your withdrawals in a tax-efficient manner while ensuring compliance with the IRS rules.

Originally Posted by Milehghcty

Why is the amount TSP estimates to satisfy RMD much higher than if I use the IRS RMD tables? I would think the same tables would apply. In my case, it makes a difference of $20k per year! I’d like the smaller amount for tax purposes.

I turn 72 in Jan of 2024, so have at least a year extension before I must take the RMD.

Milehghcty, Welcome.

I turn 72 in May 2024 and I plan to transfer my TSP funds over to my Edward Jones 401k account this year. This way I don't have two accounts to deal with and I'd rather not deal with TSP. Just a thought.

I’ve also met with our local Edward Jones office and thinking about doing the same - however thought about not moving all TSP money and leave a couple of hundred K in TSP just so I have the option to move back again if the need arises. EJs fund expense are about a half percent higher than TSP, but gives me the option to withdraw a smaller amount (not the TSP Life Expectancy amount) and direct which funds the money comes out of. The way I understand TSP works is they take a percentage of all the funds (me 6 diff funds) your are invested in - including Roths (which I don’t have in TSP).

I believe this is the table TSP uses for life expectancy for RMD calculations. The 16.4 at 73 y/o corresponds to the amount TSP estimates to pay my RMD. The IRS RMD table indicates it should be 26.5. That’s accounts the $20k difference in my case.

It can be confusing.

Make sure you're using the correct table. There are different tables depending on your dependent situation.

In your case, there is a 26.5 at age 73 in table III - https://www.irs.gov/pub/irs-pdf/p590b.pdf

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