Q. Could you provide your opinion about the pros and cons in transferring IRAs into the TSP, or keeping them separate? I understand that the costs are much less in the TSP. However, withdrawal options are more flexible in IRAs, and IRAs provide another diversification capability. A. The pros are low cost, the G Fund, simple and efficient design, ease of management and superior risk-adjusted returns. The con is limited withdrawal options. The diversification possibilities in an IRA are largely irrelevant, since the TSP’s funds adequately cover the investment world. What most people call diversification is actually concentration. The TSP’s…
Monthly Archives: March, 2010
Q. Once retired and taking distribution withdrawals from my TSP account, will I have control of which investment(s) in my TSP account the distribution withdrawal comes out of? An example would be G fund versus one of the stock index funds? A. Your withdrawal be pro-rated across all the funds held in your account at the time the withdrawal is processed.
Q. The current annuity provider for our TSP balance is MetLife. If Metlife goes into bankruptcy, what will happen to those people who have purchased an annuity from Metlife? If there is a chance that I could lose my annuity because of this company going under, what would you suggest I do with my TSP balance when i do retire? A. Your annuity might be paid in full or in part or not at all. It depends upon what happens. Your annuity could be paid out of available funds even in the event of bankruptcy. Your annuity could be sold…
Q. I am a U.S. Postal Service employee covered by CSRS and I have a fellow employee covered by FERS with the same question. Aside from the “catch-up contribution,” is it possible for me to make a one-time contribution to my TSP account. For example, I would like to take the amount of my federal income tax refund and add it into my TSP. I realize that I have already paid income taxes on this money and won’t enjoy the full tax benefits of a “pretax” contribution. I am more interested in building up my TSP balance. FYI, I am…
Q. You say neither a first-of-year, lump-sum leave payment nor a first-of-year, last paycheck qualifies as earned income for IRA purposes that same year. Considering IRA contributions are based on W2 wages, why wouldn’t the Internal Revenue Service accept these as earned income, since they are reported on that year’s W2 form, and taxed in the same year as the proposed IRA contribution? A. I suggest that you review IRS Publication 590 for guidance on this issue.
As a retirement investment adviser, I find the Thrift Savings Plan’s five basic funds to be the best examples of their kinds anywhere: • The C Fund is invested in the diversified group of stocks included in the Standard & Poor’s 500 Index and represents a diversified investment in the stock of large U.S. companies. • The S Fund provides investors with exposure to the performance of medium and small U.S. company stock. • The I Fund invests in the stock of companies in Europe, Asia and the Far East, the most developed foreign markets. • The G Fund is…
Q: I turned 70 years old in November 2009. I intend to continue government service for at least another three years. At what age does the Thrift Spending Plan withdrawal become mandatory if you are still employed by the federal government. A: No, it will apply once you separate from service.
Q: Will the mandatory withdrawals be automatically sent to me in the year I become 70 1/2, or do I have to do something? A: You need to request a withdrawal, of some kind, and then the Thrift Savings Plan will make sure that your distributions meet the manadatory withdrawal requirement, subject to the TSP’s withdrawal rules. Visit www.tsp.gov for the details.
Q: If I retire at the end of the year and receive my last paycheck for the wages in the next year, could that income be used as the basis for contribution to an IRA? You recently said “no” for this option regarding receipt of lump-sum annual leave, but what about wages earned in 2010, but not received until 2011? A: That is earned income for 2010, deferred into 2011, so is not earned income for 2011.
Q: I am retiring in August at age 57 due to mandatory law enforcement officer’s coverage. I understand that you can choose to take a monthly withdrawal amount as low as $25 per month from your Thrift Savings Plan. I also understand that you can change this monthly withdrawal amount at a designated time each calendar year. After my retirement date, is there a set period of time in which I have to let the TSP know that I want to take a set monthly withdrawal amount? A: No, although you are subject to the IRS minimum withdrawal requirements beginning…