Monthly Archives: April, 2010

Q: I’m a postmaster ready to retire at the end of the year. I’m considering withdrawing from my Thrift Savings Plan account. I have a question about withdrawing funds. One of the options states a specific dollar amount on a monthly basis. Would I be allowed to withdraw a specific percentage of my account each month? A: No.

Q: After reading your April 5 column, I was a bit confused if you were suggesting in his example that an investor in the L2020 fund should switch to, say, an L2010 or L Income fund when C, S and I share prices increase to reduce exposure to higher risk funds. I thought the point of the L funds was to leave them be until retirement? I have two Thrift Savings Plan accounts — one from the military (to which I no longer contribute) and one from my federal government service. This time last year, I swapped everything in my…

Q: I will be retiring in couple of years. Will I be able to contribute to my Thrift Savings Plan after retirement?  If so, is there any limit on contributing? If not, how will my TSP grow if I am not able to contribute? A: If you’re not receiving a federal paycheck, the only way you can contribute to the TSP is through a transfer from an eligible IRA or retirement plan account.

Q: I will have 10 years of service in the billing department of a VA medical center in May. I would like to retire when I turn 63 in January 2012. I would like to know if I can just draw from my Thrift Savings Plan money until I turn 65 and start Medicare then, and not before age 65. I need information on how and if I can do this. Can you please help me with that? A: You may draw from your TSP after you separate through regular monthly payments, which can be adjusted once each year. If…

Q: Someone told me he read an article in Federal Times that said if you wait until the year you turn 55, you avoid the 10 percent penalty on withdrawing from the Thrift Savings Plan. However, he went on to say that you still had to wait until your 55th birthday to avoid the penalty. Is that correct, and if so, where can I find that on the TSP Web site? A: As long as you separate from service during or after the calendar year in which you reach age 55, you may withdraw money from your TSP account, after…

Q: I retired 8 years ago and I check my Thrift Savings Plan account monthly. One day it occurred to me that these funds don’t operate like your usual mutual fund. The quantity of shares in my C Fund and G Fund haven’t changed since I retired. Don’t these funds throw off any cash, as in dividends, interest or capital gains? In a mutual fund, you would receive a cash payment or reinvest in more shares. What does TSP do with the cash received? A: The TSP’s fund share prices include the value of all earnings from the underlying securities.…

Q: I retired under the Civil Service Retirement System in 2008. I am 57 and my wife is 56. The financial adviser at our credit union recommends that I transfer $100,000 (half of my Thrift Savings Plan balance) from my TSP account to purchase a variable annuity from Prudential. It is called a Spousal Highest Daily Lifetime 6 Plus. The brochure guarantees that a $100,000 investment will double to $200,000 after 10 years. What are the pros and cons of such a transfer? A: I won’t comment on the pros and/or cons of a specific investment product. I continue to…

Q: I am a federal firefighter with a mandatory retirement at age 57. I plan to retire soon and I plan to completely withdraw all of my Thrift Savings Plan funds and move to a South America with a full withdraw option in one payment. How much of a tax hit can I expect to take by doing this, and is this taxed as ordinary income, as well, for the year? A: Your withdrawal will not be subject to the early withdrawal penalty, but will be subject to mandatory 20% tax withholding. Funds withdrawn from the TSP are considered ordinary…

Q: I am planning to retire in the next couple of years. I will be approximately 53 years old at retirement, and I am trying to make sure that I know all the Thrift Savings Plan regulations. As I understand it, as long as a TSP participant who retires or separates from service turns 55 in the same calendar year of retirement or separation, he can make penalty-free withdrawals any time after his 55th birthday. I also understand that TSP participants who are not eligible for regular penalty-free TSP withdrawals because they retired or separated from federal service before the…

Q: I am 56 years old and have 33 years of combined federal service (20 years in the military and 13 years as a civilian), and due to personal reasons, I chose to retire on March 26, 2010. Approximately 14 months ago, I borrowed $50,000 from my Thrift Savings Plan account. I managed to repay approximately $10,000 of the loan prior to retirement, so I still owe approximately $40,000. Can you tell me approximately how much I will have to pay in taxes and the early distribution penalty? The reason I am asking is because I am in a position…