Monthly Archives: September, 2011

Declining TSP return

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Q: I put in 20 percent of my income into my TSP and monthly see the amount decline rather than increase. Should I lower the amount I put in for the next year and place it in a regular savings account until the market comes back or continue the 20 percent and hope for the best? A: You’re talking about market timing, which is a long-shot bet. Your odds of success will be better if you determine the correct asset allocation scheme for your circumstances and goals and stay in it. This will put you in a defensive position that…

Broken contract

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Q: I’m 51 and have 27 years of postal service. If they pass a layoff or RIF, they broke the contract for me to save for my future. I would be retired in there eyes, why not let me have my TSP to pay off my home loan. I also have debt I would like to pay off. It’s not right to lay someone off before their time, then penalize them for drawing their money out. A: Ask your elected representatives why they won’t change the law.

Withdrawing TSP money

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Q: I am a retired postal clerk with FERS. I have money in my TSP. I am 57 and I called someone at TSP to ask if I can take a partial amount of my money now without getting penalized. They said I can do it only once. Is this true? A: You are only allowed one partial lump-sum withdrawal from your TSP account. That’s a TSP rule. Whether your withdrawal is subject to the early withdrawal penalty is a matter of law. Once you have taken a partial lump-sum withdrawal from your TSP account, your only withdrawal option is…

Managing your pension fund can seem like a full-time gig

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It looks like most career federal employees will wind up working in retirement, after all — as their own pension fund managers. Federal employees, for all the challenges they face, enjoy something that is increasingly scarce in the private sector  — a guaranteed annuity. Not only are guaranteed retirement streams rare, but guaranteed retirement income with inflation protection — like that in Civil Service Retirement System and Federal Employees Retirement System annuity payments — is even rarer. There are increasingly frequent and aggressive calls for cuts to the federal budget, and in particular, to federal retirement benefits costs. As a federal employee,…

C Fund purchases

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Q: Have you noticed that the C Fund is consistently up on the dates that the bi-weekly purchases are made for employee accounts? The attached table shows the closing price of the S&P 500 for each date in 2011, with TSP purchase dates in yellow. As you can see, a large number of the purchase dates occured on big up days and none of the purchase dates occured on big down days. The result of this is that participants receive less shares than they would if the purchases were distributed over each trading day of the period. To prove this…

TSP and divorce

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Q: I am 37 and have three children. My spouse will retire after 20 years in the Army in December or January. We are in the middle of a divorce. What are my options regarding any portion of my spouse’s TSP I may be entitled to? Does an annuity make sense? A: An annuity is an option, but you would lock in today’s interest rate for life. Otherwise, you may continue to manage the money yourself, or pay someone else to do it for you.

Withdrawal penalty

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Q: I am 56 and will retire in December under FERS. I read your article in Federal Times’ Sept. 12 issue, “How to avoid TSP early withdrawal penalty.” What other options are available besides transferring my TSP to an annuity with an insurance company? A: The article clearly explained the answer to your question – since you’re retiring during or after the year in which you reach age 55, the early withdrawal penalty will not apply to your TSP withdrawals.

TSP annuities

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Q: Should I entertain the idea of purchasing a TSP annuity? Since I have been in the system, the annuity interest-rate index has tanked from well more than 4 percent to today’s rate of 2.875 percent. To me this means I would have made more per month a few years ago retiring when I had $300,000 than I can now with $560,000! Wow, big mistake. Can you advise if 1) the AIRI will bounce back? Or 2) what is my alternative if I should decide to pull the plug next July? A: You should always be willing to consider the…

TSP and retirement

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Q: I plan to retire March 1. I am thinking about maximizing my TSP and TSP catch-up contributions for the first two months of 2012.  That would be a total contribution of $16,500 and $5,500 respectively. I know this would have huge tax advantages for 2012 and increase my retirement investments, so is this a good plan?  Upon retirement, I will have 720+ hours of annual leave and do not want to have a huge salary increase for the tax year, and this is one way to accomplish this. Am I overlooking something? A: “Is this a good plan?” is…

TSP restrictions

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Q: I know I can receive a monthly payment once I retire, I can take all my money out when I retire, and I can leave my money in TSP until I am 70 1/2. Someone told me that there are some restrictions about  taking my money out. I am 58 and have 35 years service so when I retire I intend to keep my money in TSP. I know that when I am 70 ½ I have to start taking money out. I want to know if, say five years down the road, I decid I want to take…

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