Q: At a recent retirement seminar the speaker stated that if you passed away, your spouse would be able to receive the balance of your TSP account, but your children would not. He stated it would go back to the government. Could you please tell me how this would work? My husband and I are both federal employees and both have TSP accounts. A: Not true. Your TSP is paid out according to your beneficiary designation. If your designation is not on file, your account will be distributed according the following statutory order of precedence: 1. To your widow or…
Monthly Archives: December, 2011
Q: In light of the current economic climate, I’m concerned about what to do with my TSP account. I’m hopeful you would be willing to share your thoughts concerning some of the investment advice services out there that purport to offer advice regarding TSP fund distribution for maximum returns. I’m concerned because I’m 55 with about 10 years left to go in the federal government and about $250,000 in my retirement TSP account and all of it in the G fund, and I don’t want to jeapordize my retirement, which isn’t far off. A: Market timing services are a sucker’s…
Q: I must withdraw (roll over) my TSP account beginning Feb. 25. Can I withdraw the funds to refinance my home? Would this use of my funds result in a higher tax liability than if I rolled over the funds into an investment fund? A: All funds distributions from the TSP are taxable unless they are considered a loan, or rolled over to another tax-deferred retirement account, such as an IRA. It doesn’t matter what you use the funds for. A Required Minimum Distribution may not be rolled over and must be included in your taxable income for the year.…
Q: I retired on April 30 and rolled my 401(k) into a traditional IRA. I also turned 74 on April 30. When must I begin withdrawing from my IRA? A: You must begin taking withdrawals this year.
Q: I am planning to retire next year. I have about $100,000 in my TSP account and about $60,000 in credit cards. Should I use my TSP to pay off my credit cards, or is there something else I can do? A: No one can tell you what you should do without a lot more information and some careful consideration. You can either live beneath your means and pay off your debt, or you can default on all or part of your debt. Those are your choices.
Hedging is an investment concept that is either too unfamiliar or seems too exotic to be seriously considered by most individual investors. But, as a Thrift Savings Plan investor who is relying on your savings — and your skill at managing those savings — to provide you with an acceptable lifestyle in retirement, you should recognize hedging as an essential element of a sound investment strategy. Hedging is nothing more than finding ways to reduce the investment risk you face to an acceptable level. Fortunately, the TSP provides you with everything you need to implement an effective strategy to hedge…
Q: I have been contributing 17 percent into the TSP, and have two loans against the fund. It appears that the loans repayments are pre-tax just as the the contributions are. Is there a disadvantage to reducing the contribution to 5 percent (to maintain the matching from my employer), and re-amortizing one loan with that 12 percent to pay it off faster? A: Your premise is incorrect. Your TSP loan payments are not tax-deductible, that is, they are made with post-tax dollars. Your loan gave you spendable, after-tax dollars, and it must be repaid with spendable, after-tax dollars.
Q: I’ve recently read that if I plan to retire at age 65, and my total annual household income is $100,000, that I would need $1.1 million in savings and assets. Because I plan on keeping as much as I can in the TSP after retirement, can I tack on the interest to be earned on my account savings onto my TSP retirement savings to come up with a “summation” of life-savings value to be able to say what amount I could/should realize? The article also suggested that a 3.6 after-retirement percent interest rate would be a cautious assumption. Your…
Q: I am 46 and plan on leaving federal service. Can I avoid the 10 percent tax penalty if I use my TSP savings to purchase an annuity? A: Yes.
Q: I have been trying to find out for more than a year why the deductions from my paycheck for the Thrift Savings Plan and the catch-up deductions do not equal the amount on the Personal Benefits Statement for 2008. I have been told it is an estimate. I know the benefits are estimated but the total deducted from my checks is not an estimate. I have had the TSP for nine years. The amount for the TSP and catch-up contributions on the Personal Benefits Statement for 2008 is $15,582.84, the amount deducted for the TSP and catch-up contributions from…