Q: I plan to retire in 2015 under FERS at age 56 with 31 years of service. Can I withdraw all my money I have in TSP ($500,000) at once, or is there a limit on how much can be withdrawn? I believe because I have the correct MRA, there would not be a penalty for withdrawal. Is this correct? A: You may withdraw all of your money at once after you separate from service. Your MRA has nothing to do with it.
Monthly Archives: July, 2011
Q: I understand that by law the TSP G Fund must be “made whole” such that the funds cashed out to fund current operations instead of being reinvested must be put back into the fund with interest as if they had been reinvested as scheduled. However, I disagree with previous posts that say there will be no impact from default. If the government defaults on repaying debt (principal and interest on treasuries) due to not increasing the debt ceiling, then the market reprices treasuries to account for risk (higher yield, lower price). Does this price decrease in current treasuries, then…
One of the main obstacles to effective retirement planning is the process of estimating retirement spending. Here is the approach that I use with my clients, consistent with my philosophy to start with the easiest method and move to more difficult, intensive methods only if the previous method doesn’t provide the needed answer. It’s usually safe to assume that, while you’re working and saving, your income is going to one of four destinations: You are saving it, spending it, losing it to taxes or giving it away. If you take your gross income, subtract your pretax savings, then subtract your…
Q. I retired under the provisions of early retirement for law enforcement officers on Jan. 1, 2011, under CSRS after 35 years of federal service. At the time I retired I was 54 years old, but will be 55 years of age in September. From what I have read in the TSP booklet regarding the 10 percent early withdrawal penalty and cited exceptions to this penalty, I would not be subject to the penalty in that I separated from service during the year I reached age 55. Is my interpretation correct, in that I did not have to actually be…
Q. I am nearing retirement in law enforcement and will only be 47 years old. I am trying to determine the best way to withdraw a small portion of my TSP account to avoid the early withdrawal penalty. I am wondering about purchasing an annuity at less than 100 percent of my $400,000 TSP balance. These payments would be monthly for life I understand, but what happens to the remaining money I have in the TSP? May I invest it as I choose in the various funds and what are my withdrawal options for that money as I doubt I…
Q. I have just been granted a medical disability from civil service, and I would like to withdraw some money from my TSP account. I would like to know if the rules apply for TSP like they do for an IRA account in waiving the 10 percent penalty if you have a permanent disability. A. Yes, the “totally and permanently disabled” exemption from the early withdrawal penalty does apply to the TSP.
Q: I’m a Federal Employees Retirement System retiree, 70 1/2 years old, and have been receiving fixed monthly payments from my Thrift Savings Plan account to cover my living expenses since my retirement in 2006. I will begin required minimum distributions this year and would like to know if the IRS will allow the amount of my annual TSP withdrawals that exceed my TSP yearly RMD to be credited against the RMD requirements due to start this year for the standard individual retirement accounts I hold from credit unions, banks, etc. A: Your RMD must be calculated separately for each…
Q: Does a federal employee who is fired get to retain Federal Employees Retirement System defined benefit plan annuity and government contributions to his Thrift Savings Plan? A: You are always fully vested in your contributions and the government’s matching contributions. The automatic 1 percent agency contribution under FERS vests after you have completed three years of federal civilian service (two years for congressional and certain other noncareer positions).
Q: I always find that financial planners do not make clear about upcoming expenses; they mostly talk about more and more income. For example, a statement like “you need 80 percent of your current income” — I never understood this figure. It looks like all financial advisers assume this figure. In a recent article, you advise a reader that she needs an income of $72,000. How do you come up that figure? Does it include mortgage payments? Say, $20,000? A: I can’t possibly tell you what your desired life expectancy in retirement will cost; that’s something you’ll need to figure…
Q: If Congress is slow to approve a raise in the debt ceiling and the government decides to furlough employees in order to pay other loans, what are my options to use Thrift Savings Plan funds to put food on the table? Can I only make early withdrawals that are subject to penalty and tax, or can I get a hardship loan with delayed repayment when my checks start again? A: Unless an exception is offered, you should assume that you will still be considered “in-service” during the period and will be subject to the in-service withdrawal limitations. This means…