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Views and opinions expressed in this column are solely those of the AFSA Retiree VP.


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TSPs, RMDs, QCDs and AFSA: Go for the QuadrupleWin!

“It is better to give than

receive.” Most would agree

with this biblical maxim—at

least in theory. With a slight

modification I believe I can

gain universal agreement:

“It is better to give than

be taxed.” I will explain my

maxim by exploring the

medley of acronyms in the



The Thrift Savings

Plan is the federal govern-

ment’s successful version

of the private sector 401K.

The mutual funds available

under the TSP are good

performers, the transaction

costs are kept at a mini-

mum, the assets grow tax

free, authorized contribu-

tions are tax deductible and

the federal contributions are


More than a few col-

leagues have become mil-

lionaires and many more will

achieve this status in years

to come. What’s not to like?

The RMD is what is not to



The government

wants to make sure that

(except for Roth IRAs) tax

favored retirement vehicles

(e.g. 401Ks, regular Indi-

vidual Retirement Accounts

and TSPs) are actually spent

and taxed in retirement.

Hence, the law requires

that starting at age 70 years

and six months a portion of

the tax favored assets must

be distributed and taxed

every year. The portion is

based on the owner’s life





expectancy and a bureau-

cratic formula. This is called

the “Required Minimum


I really resent (“hate” may

not be too strong a word)

the RMD, which complicates

my efforts to provide for

my younger wife and our

disabled daughter. I do not

know anyone who likes the

RMD. My angst, however, is

assuaged by the QCD.


Last year a law

was passed making perma-

nent a feature that had been

part of the annual process

for several years. Qualified

Charitable Distributions up to

$100,000 can now be made

annually from some retire-

ment vehicles (IRAs–though

not directly from the TSP)

and they are not counted as

income but are counted as

part of the RMD.

My rule of thumb is

simple. Take whatever is

needed for current expenses

from the retirement vehicle.

If it is more than or equal to

the RMD, fine.

If it is less, then you have

a choice. You can meet the

RMD by taking cash out and

paying taxes thereon; or you

can give the same amount

as a QCD to one or more of

your favorite charities and

pay no tax on that amount

of income. To make the RMD

into the QCD the money

must be in an IRA and not the

TSP. Because the TSP has a

rule that requires only one

partial distribution, it is sug-

gested that the TSP money

be moved into an IRA before

the year you turn 70 and six


AFSA recommends that

you consult with a financial

planner before taking any

firm steps with your money.

It has been a long time

since I reached RMD age.

For several years I have

contributed to my favorite

educational and Foreign

Service 501(c)(3)s by giving

them appreciated stocks

(even more leverage) from

my IRA that I don’t need to

convert to income for current

expenses. It is very satisfying.

Where, then, does my final



, fit into this


As AFSA President Bar-

bara Stephenson explains in

her column, AFSA is develop-

ing an ambitious outreach

plan to tell the proud story

of the Foreign Service to the

American public. Building on

a series of strategic partner-

ships, AFSA aims to build a

domestic constituency for

As soon as the year turns, I will be calling my broker to

execute the quadruple win. I hope you will do the same.

the Foreign Service by win-

ning over supporters in all

50 states who are prepared

to stand up for the Foreign

Service and defend the

importance of our mission.

That outreach effort will be

supported by the Fund for

American Diplomacy, one of

AFSA’s 501(c)(3) arms.

This initiative is worthy

of full support by all For-

eign Service personnel on

the merits. For us retired

persons, the initiative offers

a chance to participate in a

quadruple winner.

A gift to the Fund for

American Diplomacy from

an IRA or TSP is a win for

the FAD. It is a win for the

Foreign Service because the

FAD works to strengthen the

links between the Service

and the American public. It

is a win for the United States

because our diplomacy

gathers public support and

is strengthened thereby.

And it is a win for the indi-

vidual donor, whose taxes are

reduced and self-esteem is

increased by contributing to

our profession.

As soon as the year turns,

I will be calling my broker to

execute the quadruple win.

I hope you will do the same.

Diplomacy matters.