Navigating the December RMD Season: Avoiding Crucial Mistakes in Your TIAA Accounts

December 15, 2023

Greetings, HigherEd retirees! Greg Shepard here, your dedicated companion in unraveling the intricacies of higher education retirement plans. As we step into December, a crucial RMD (Required Minimum Distribution) season, I bring your attention to a significant mistake you must avoid, especially if TIAA accounts are a part of your retirement portfolio. Welcome to the HigherEd Retire Blog – your go-to source for navigating the complexities of TIAA retirement plans.

Understanding the RMD Landscape:

Before we delve into the real-life scenario, let's briefly touch on the importance of RMDs. Required Minimum Distributions are mandatory withdrawals from retirement accounts, and as we approach the end of the year, it's essential to grasp the intricacies to ensure a smooth retirement journey.

The Real Scenario:

In a recent community incident – not from a client, but an individual navigating retirement from a higher education institution – a critical mistake unfolded during an attempt to manage RMDs efficiently.

Cumulative RMDs and the Multi-Account Approach:

The retiree, well-versed in the rule allowing the cumulative withdrawal of RMDs from one account when dealing with multiple IRAs, had funds spread across both TIAA and another vendor, Vanguard. The strategy was solid – consolidating RMDs for simplicity.

The Unfortunate Slip-Up:

Where the hiccup occurred was in initiating a 10-year Transfer Payout Annuity (TPA) for RA contracts at the old university within TIAA. During the transfer of significant funds from the CREF side to Vanguard, a simple form-filling error proved costly.

The Tax Withholding Surprise:

The retiree failed to indicate that RMDs had already been withdrawn from other accounts, specifically Vanguard. Consequently, TIAA, unaware of the RMD status, withheld taxes before the transfer, resulting in a net transfer 25% less than intended – an unforeseen financial setback.

Key Takeaway:

This real-life scenario emphasizes the importance of meticulous execution, even for the most astute individuals. RMD strategies can be intricate, and a small oversight can lead to unintended consequences. As we wrap up the year, it's crucial to ensure your RMD plans are well-executed to prevent surprises and financial setbacks in your retirement.

Connect with Me:

If you find yourself uncertain about your specific situation or want to avoid potential pitfalls in your retirement journey, don't hesitate to reach out. My contact information is below, and I'm here to assist you in navigating the nuances of higher education retirement plans.

Conclusion:

In conclusion, good intentions are vital, but flawless execution is equally crucial, especially when managing RMDs in your TIAA accounts. Let's ensure your retirement plans align seamlessly with your goals. Greg Shepard here, urging you to have a great one! Take care.

Greg Shepard

S&A Financial Services, Inc. 

YouTube Channel - HigherEd Retire

Podcast - HigherEd Retire´╗┐

greg@shepardfinancial.com

*Disclosure* S&A Financial Services, Inc. is a registered investment advisor. Content presented is for informational purposes only and should not be considered as investment advice or as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Always consult with your tax advisor or attorney regarding your specific situation.