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Thrift Savings Plan rule change aimed at spurring savings growth

November 1, 2023

READ FULL ARTICLE AT » www.federaltimes.com

A rule taking effect at the start of the year will align the Thrift Savings Plan, the employer-sponsored plan for U.S. civil service employees, retirees and members of the uniformed services, with other IRA savings accounts, meaning federal retirees can keep money growing in their “after-tax” accounts for longer.

Beginning Jan. 1, 2024, only traditional TSP balances will be subject to mandatory withdrawals. Historically, a required minimum distribution, or RMD, applied to the combined balance of the traditional and Roth TSP account. Participants could’ve skirted that by choosing to take an RMD only from their traditional balance, but that left it subject to tax.

“This means an overall smaller amount of [the] TSP is subject to the RMD, which effectively creates a smaller RMD and does indeed allow TSP participants to maintain more dollars inside their accounts,” said Thiago Glieger, a private wealth expert for Maryland-based RMG Advisors, to Federal Times in an email.

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