Congress passed and the President signed the budget to fund the government. Included in the budget was the Secure Act. The Secure Act was a bipartisan agreement that changed and enhanced the pension system. This included allowing annuities to be part of the IRA or 401k plans and no age restrictions on IRAs. there are many other significant changes and they can be found Here
For teachers who are near or are retired, the most important change is the SECURE Act pushes the age that triggers RMDs from 70½ to 72. That gives the retiree another year and a half of appreciation before giving the Federal government their Required Minimum Distribution (RMD)..
Here are my two posts where I discuss the Required Minimum Distribution and the TDA. Here and Here. ontill TRS and the UFT allow for a ROTH option,when you pay the Federal Government their money upfront, the RMD is the penalty we pay for having a tax deferred TDA.
10 comments:
I object to your characterization of the RMD as a penalty. In my case it was merely the end of a
45 year deferral of taxes owed on money earned.
Hi Chaz, I retired recently and my daughter was accepted (fortunately and unfortunately) to an Ivy League with very little financial assistance, she'll be living on campus to boot :( - I'm only 58 and trying to avoid a penalty for raiding my TDA. Someone told me Trump (maybe) did or will (?) sign something into effect that won't penalize parents, like myself, for going into their tax deferred savings to pay for college for their kid. Any advice on the matter would be greatly appreciated. Thanks
This may be a rookie question. I do have a TDA account and it is growing nicely.
I initially thought that the TDA was our earnings, taxed right now, and then put away for us with no future taxes when we withdraw, because we already paid taxes on it.
However, I kept hearing over the years that when we withdraw funds later in life when we are old, that we pay taxes on the withdrawals at that time,
What if the tax rate 20 years from now is through the roof? What if those socialists take power and tax our TDA at 80% or some ungodly thing?
Other than being a piggy bank with a good interest rate, would the future taxes take away that advantage?
That's why the TDA needs a ROTH option so that you pay taxes upfront since the tax rate in the future is unknown.
8:28 PM. You are not paying taxes on the money that goes into your TDA now. It continues to grow tax-free until you withdraw it. When you take it out, either voluntarily or through an RMD it is taxed as ordinary income
Chaz please advise. 329000 in TDA. 9 years until retirement. 8.25 %. 300G at fixed future additions variable A. Should I move money to NYC Roth? If no should I increase more % to variable A or new equity fund? Please respond I value your blog and advice. A sane AP
The problem is that the NYC ROTH has no fixed income fund that gives you 8.25% (7% for UFT members).
Based on the limited information you provided I would have future contributions in 75% Fixed and 25% ,k in equities, assuming you have no other retirement funds in equities.
My rule of thumb is that I increase my TDA contribution by 1% fir every raise I relieve,
I beleive you can take out 10 grand or maybe 20 grand a year from TDA and only will be hit by a state tax. That might help out for college. Did I get that right? Thanks
No state tax on nyc tda withdrawals for retirees. Only federal tax.
Off topic a bit but related to possibly generating more income per month. I took the option of a reduced pension, with a pop up should my spouse pass before I do. A wise teacher told me that I was giving away about 20% of my pension and that I should have taken the max and went with life insurance, since a death benefit, unlike my pension, is untaxed. So a million dollar policy would pay her just that. No taxes. My colleague teaches math and showed me the numbers. It was sort of surprising. I don't have life insurance. I just turned 55. Any advice regarding life insurance as opposed to a pop up, reduced pension option? We are talking about strategies for lessening the tax burdens here. If it's too far off topic, perhaps a post about that strategy in the future? If not, see you folks at the pre age 72 seminar in the year 2037. Newly retired and loving it. If you're still in service, all the best to you. Much respect for what you do. See you on this side some day.
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