Q: I retired two years ago as a CSRS retiree at age 60 and with a nice sum in my Thrift Savings Plan. I made a partial TSP withdrawal at that time to give me cash to pay off some bills. I have decided to buy a second home for tax purposes and would like to withdraw enough money out of my TSP account for the down payment. How could I get $50,000 out of my TSP when I already made a partial TSP withdrawal two years ago? Could I request monthly payments of $25,000 and get those two monthly…
Monthly Archives: February, 2011
Q: I plan to retire at 67 with 30 years of FERS postal service. My TSP has $262,000 now. It should be close to $300,000 when I retire. My wife is five years older than I am. We are both in very good health. I suggested buying a joint annuity with my daughter who would be 30 instead of her as the joint recipient because of her age. If I died first she would still receive $700/month from my daughter’s annuity and then the daughter would receive it after my wife died. Would this be a better bet than taking…
Q: I would like to take a portion of my TSP balance and transfer it to a self-directed IRA. What is the process for doing that? What are the estimated costs and penalties? A: In your circumstances — actively employed and younger than 59 1/2 — the TSP won’t allow this.
Q: Under FERS, federal LEOs can retire at age 50 (IRS Publication 721). There is an exception to the 10 percent early withdrawal penalty from a TSP account for “qualified public safety employees” (IRS Publication 575). If I wanted to take money out of the TSP to pay off my house when I retire at age 50 and leave the rest in the plan until later, I would be subject to the 10 percent penalty for early distribution. I understand that the exception is not automatic, in that the TSP will put code “1” (early distribution) in box 7 (type…
Q: I retired when I was 55 years and 10 months old in February 2008. I did a partial transfer of my TSP to IRAs. There is approximately $10,000 left in the TSP. Would I be subject to the 10 percent tax if I withdraw it all? I will be 59 1/2 in October 2011. A: No.
Q: I am a former federal employee who was separated after two years of service. I still have my TSP account and enjoyed how user-friendly it is. Is it possible for me to continue making contributions to my TSP account even though I am now working in the private sector? If so, how can I set this up? A: You can’t make regular contributions to the TSP after you separate from federal service, but you can transfer pre-tax IRA and 401k money into the TSP. Contribute to your employer’s 401k plan and then transfer it into the TSP when you…
Q: I know nothing is guaranteed, but I’d like to earn 5 percent on my TSP balance over the long haul. Looking at the stats for the F Fund, it looks like putting my money in the F Fund will result in a 5 percent gain over the long haul, with only minor fluctuation, unlike the stock funds. I’d appreciate your insight, particularly on the flaws of my theory. A: If what you mean is: “How can I maximize my chances of earning exactly 5 percent, per year, from my TSP account?” then my answer is to invest it all…
Q: Upon retirement from federal service I opted for life insurance, with monthly premium payments withdrawn from my monthly retirement checks. I now no longer need this insurance and would like to cancel it. OPM says they are not able to do this. How do I go about canceling this life insurance? A: From the OPM: “Unless you have assigned your insurance, you may cancel it at any time. If you cancel your basic life insurance, you are canceling all your optional insurance as well. If you elected 50 percent or no reduction for your basic life insurance, you may…
Q: What is Pension Max? Some people say it’s good while others say it’s not. I can’t seem to find any information on it. A: Pension Max is a term used to describe substituting a life insurance policy on a pensioner’s life for a pension survivor benefit. In the case of a federal annuitant, it’s a bad idea. It favors the pensioner at the expense of the survivor. Of course it pays off very well for the insurance agent who sells it to you.
Q: Is there a certain time/age requirement for drawing out your TSP? A: You must start taking Required Minimum Withdrawals based on your life expectancy by April 1 of the year after the year you turn 70 1/2, or when you separate from federal service, whichever comes later.