What constitutes retirement for TSP RMD purposes?

Submitted by Steven Van Wie on Tue, 2018-06-05 12:20

Client is over 73 years of age and still working as DOD subcontractor, and is a TSP participant. Her desire is to postpone taking the RMD from her TSP as long as possible. She plans to retire 12/31/2018, and will receive payments for vacation time, accrued personal time, etc. in 2019. Do her 2019 payments constitute “still working” for the continued delay of her RMD? If not, would working 1 more month do that job?



Submitted by Alan - IRA critic on Tue, 2018-06-05 18:09

  • Client needs the employer to show her as still employed at year end to avoid a 2018 RMD. In other words, on their books her retirement date needs to be any date after 12/31/2018, even one day will do. Benefits paid after 12/31 do not extend the retirement date no matter how many weeks of pay she will receive.
  • If she cannot avoid a 2018 retirement date, then 2018 will become her first RMD distribution year, but her required beginning date will be 4/1/2019. Since she will have a full year of taxable income in 2018, it will likely benefit her to take 2 RMDs in 2019 since earned income in 2019 will be small. If she then wants to do an IRA rollover of the balance in 2019, both years RMDs must be distributed and not included in that rollover. Client should be aware that the TSP beneficiary options for non spouse beneficiaries are not good and if she is single and leaves the TSP in place, her beneficiary will have to take a lump sum distribution upon her death.
  • In summary, if she wants to delay RMDs as long as possible on this balance, her retirement date needs to be after 12/31/2018. If so, the previous comments about the required beginning date etc will all apply one year later.

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