Monthly Archives: October, 2011

TSP contribution increase

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Q. I read that the IRS changed the 2012 maximum contribution to 401(k)s to$17,000 from $16,500.  However, I haven’t found any update on the TSP website or the Federal Times saying whether this will also apply to TSP contributions.  Have you heard any news on this? A. Not yet, but I expect the TSP to follow suit.

F Fund investors should move some funds to G Fund

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It’s often said that it doesn’t pay to try to time the investment markets. However, we are in a situation now that makes one particular timing move a good bet for Thrift Savings Plan investors: moving some money out of the F Fund and into the G Fund. The G Fund, a unique investment fund available only to TSP participants, guarantees to give you back whatever money you put into it, on demand, without risking the loss of your principal — like a money market fund. In other words, it’s liquid. But unlike a money market fund, which typically pays…

TSP vs. IRA

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Q. What are the advantages of moving my entire TSP into an IRA when I retire? A. The only good reason is that you MUST withdraw the money in ways not permitted by the TSP – multiple lump sums, for example. I regularly counsel my clients to leave their money in the TSP as long as possible.

TSP withdrawal

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Q. 1 will turn 70 in July 2012 and would like to know when I must begin withdrawing from my TSP and is there a certain amount that I must withdraw? A. Since you will not be 70½ until 2013, your first withdrawal will be due by April 1, 2014, the year after the year in which you reach age 70½. This withdrawal will be for 2013, and your subsequent withdrawals will be due by Dec. 31 each year beginning with 2014. The minimum amount due each year is a moving target based on your life expectancy. Fortunately, the TSP…

Moving funds from IRA to TSP

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Q.  You suggest in one of your responses that you can move funds from your IRA to the TSP. What are the limitations and rationale for doing so? A. The money must be all pretax money – no nondeductible contributions. The rationale is that you will enjoy fully diversified, nonoverlapping investment funds at ultra-low cost, and the G Fund. Using these funds will enable you to implement an investment strategy that will produce superior risk-adjusted expected rates of return.

L funds

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Q.  I was in the 2010 Fund. Then when that date came and went, I was at a loss as to which fund to go to. There is the plain L, and then it goes up from there. I plan on retiring in or about 2013. Which fund should I be in?  One that is aggressive yet safer than the one above the 2010 fund? A. I can’t tell you which L Fund you should be in, but once the L 2010 fund “matured,” your money was moved into the next more conservative fund: the L Income fund. Now the…

RMD and Roth IRA and taxes

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Q. I will be retiring in 2012 and must also take a required minimum distribution  from my TSP in 2012.  I would like to do a partial withdrawal in the amount of the RMD prior to the date I retire, to be followed by monthly payments upon retirement.  My question is whether I can rollover the RMD into a Roth IRA, so that I would be paying income tax on the Roth IRA withdrawals as the withdrawals are being done, rather than on the entire amount of the RMD. If I read the TSP material correctly, it appears that this…

TSP monthly withdrawals

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Q. I’m a FERS employee with the U. S. Postal Service  and plan on taking a monthly TSP withdrawal when I retire at 64.  I assume that the dollar amount can be changed either up or down at the beginning of each year. Is my assumption correct? A. Yes.    

Withdrawal from 401(k) or TSP

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Q. Is there a way to withdraw money from my 401k or TSP without paying a tax penalty, in order to use the money to pay for college tuition for a child? A. The rules are complex, but there are ways around the early withdrawal penalty. Read the notice at the following link for more information: https://www.tsp.gov/PDF/formspubs/octax92-32.pdf. Pay particular attention to the left side of Page 4.

Federal tax on lump-sum TSP withdrawal

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Q. I am retiring Nov. 30 and considering using a lump-sum withdrawal from my TSP to pay off my mortgage. I have read material at the TSP website and Googled my questions but not found a clear answer about the tax withheld.  What is the federal tax percentage on a lump-sum withdrawal? I am 63 ½ and not withdrawing all funds. I would be making one withdrawal, leaving the balance to continue the investment, and no intention of future withdrawals. A. The TSP will withhold 20 percent of the distributed amount for federal taxes.

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