Monthly Archives: July, 2011

Penalties for withdrawals


Q: If I retire at the age of 50 (21.25 years of service), I have a question concerning TSP. If I choose the life expectancy withdrawal at that time, from what I gather it is penalty free. In the year I turn 55, can I switch to the monthly payment withdrawal, and would that too be penalty-free? A: You’re talking about avoiding the early withdrawal penalty by using a series of Substantially Equal Periodic Payments (SEPP), which must continue for five years, or until you reach age 59 1/2, whichever is longer. You will find a SEPP calculator and additional…

Rolling over funds


Q: I am resigning from a not-for-profit and wish to roll over my 403(b) savings into another retirement savings plan. Would it be better to roll over to the FERS or into a self-directed IRA? What are the advantages and disadvantages of both alternatives? Is either one “un-doable” later if I change careers again? A: You can’t roll over your 403b account into FERS, but you can transfer it into a TSP account, if you have one. You can later roll your TSP balance into an IRA or another eligible employer sponsored plan if you like, but I’m not sure…

TSP withdrawal


Q: I have been awarded 100 percent permanent and total disability from the VA. I would like to take an early full withdrawal of my TSP. I have seen a comment that a waiver for the 10 percent penalty would be exempt, does the 20 percent early withdraw still apply? A: I assume that you are asking whether, or not, mandatory tax withholding will apply to a full, lump-sum withdrawal of your TSP balance. I believe that you will be subject to mandatory 20 percent withholding from the withdrawn amount, but there may be an exception in your case. You…

Deadline approaching


Q: If President Obama and Congress fail to meet on the Aug. 2 deadline concerning the debt ceiling issue, how could this affect my TSP? Also, would It be advisable to move all of my money into the G fund, assuming that they don’t reach an agreement? Is this the safest place for my investment to be during this time? A: Yes, any significant economic event has the potential to negatively affect your TSP balance. The G Fund is the safest TSP option when it comes to risk of loss of principal.

Transferring TSP funds


Q: With all the recent craziness going on in Washington on whether or not to raise the national debt ceiling or face a national financial disaster? Is it wise to do an inter-fund transfer of all your TSP assets into G fund while this whole mess gets sorted out? Or should I leave the funds alone. A: What you do should be part of an overall strategy. What’s best for one approach may be wrong for another approach. It’s like asking whether you should turn your car left or right. It depends upon where you’re going, when you need to…

Withdrawing funds


Q: I stopped work in March of 2009. I applied for OWCP. OWCP had paid for two back surgeries in 1989 and 1991 as well as continues to pay for ongoing treatment. I was denied OWCP so I applied for disability retirement which was approved. I am still on interim retirement pay. I withdraw some funds from my TSP to cover me for the time period between OWCP and retirement. I now need to withdraw more for medical reasons. Since I am medically disabled from my federal position as well as medically retired, what is the best way to withdraw…

TSP and default


Q: I saw my TSP drop by $100,ooo in 2008. I’d like to be ahead here if a default does happen. In an earlier post you said there would be no change in the G fund, but if the bond rating is downgraded, how could that be correct? That would impact immensely on the G fund’s value. What other options do we have to safeguard what we’ve amassed? A: It could be, and is true. You did not see your G fund investment drop in value in 2008. Changes in the market value of government bonds DO NOT affect the…

TSP and Roth


Q: I want to rollover as much of my TSP account as possible into my existing Roth IRA account when I retire in 2013.  I have NO NEED for my TSP account to supplement my income during retirement and want to leave as much of it as possible to heirs. Problem:  Because the account may have as much as 700K in it at that time, the income tax due on a “one time” distribution of all or most of that amount would severely reduce the net value of the transfer. Questions: 1.  Can I directly transfer all or any portion…

Aggressive return


Q: I want to retire early. I have little in TSP savings, no private savings, and debt. I’m eligible for early out in about 11 years. I would like to be ready at that time. It doesn’t mean I will go, but I want to have the option. I am contributing 6 percent of my pay in order to receive the matching funds. What would you recommend I invest in for an aggressive return? Once I pay off my car I plan to increase my contribution. This will not be until 2014, which would give me about eight more years…

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