In my Sept. 27 column, I discussed intramarket diversification and explained how it can help to reduce a certain kind of risk in your Thrift Savings Plan account without reducing the rate of return you should expect from your investment. In this column, I will discuss intermarket diversification and its benefits. Like intramarket diversification — owning multiple securities within a given market — intermarket diversification is an important investment management tool that should be used to its full potential in every retirement investment portfolio. Intermarket diversification is the process of dividing your investment portfolio among a variety of markets with…
Monthly Archives: October, 2010
Q: I am a Civil Service Retirement System 50-year-old employee. I’d like to withdraw $80,000 from my Thrift Savings Plan to cover unsecured debt. Is this smart? My debt is strangling me. What is the tax hit and how can I avoid it? A: You don’t have the option to make a withdrawal unless you can demonstrate financial hardship under the TSP’s definition. If you take a financial hardship withdrawal, you will owe tax on the amount you take and you will be subject to the 10 percent early-withdrawal penalty. You can, and should, consider taking a loan instead. Taking…
Q: I am a rehired federal annuitant. Am I eligible for a deductible IRA? A: That will depend upon your age, marital status, whether or not you or your spouse are covered by an employer-sponsored retirement plan, and your income. Check IRS Publication 590, consult a tax adviser or use one of the many IRA eligibility calculators available online.
Q: I had read that a fixed amount of money in (not making active contributions to) the G Fund would grow over time based on the G Fund’s rate of return. Is this correct? A: It is correct.
Q: I read your column in Federal Times regularly. I don’t understand how your calculate (in percentages) the return on the Individual funds. Can you share with me how you do the math? A: Since all dividends and capital gains are retained in the funds, you calculate the percentage return on a TSP fund investment by dividing the fund’s share price at the end of the measurement period by its price at the beginning of the period and multiply the result by 100.
Q: I read your column in Federal Times regularly. I don’t understand how your calculate (in percentages) the return on the Individual funds. Can you share with me how you do the math? A: Since all dividends and capital gains are retained in the funds, you calculate the percentage return on a TSP fund investment by dividing the fund’s share price at the end of the measurement period by its price at the beginning of the period and multiply the result by 100.
Q. I am a CSRS 50-year-old employee who would like to withdraw $80,000 from my TSP to cover unsecured debt. Is this smart? My debt is strangling me. What is the tax hit and how can I avoid it? A. You don’t have the option to make a withdrawal unless you can demonstrate financial hardship under the TSP’s definition. If you take a Financial Hardship withdrawal, you will owe tax on the amount you take and you will be subject to the 10 percent early withdrawal penalty. You can, and should consider taking a loan, instead. Taking a loan will…