Q. I recently received my “FERS Your Personal Benefits Statement Based on your Account as of January 01, 2012.” It states, “As of December 31, 2011, your TSP account balance was $130,841.13. It goes on to say, “Assuming you continue TSP contributions [$877 per pay period] at the same rate and earnings on your account average 7% [Wow. How unrealistic is this!], your estimated TSP balance when you are first eligible to retire would be $158,107.” My current TSP balance is $137,000. It gives estimated Thrift Savings Plan monthly annuities as follows: If you retire at age 64, your single life annuity…
Monthly Archives: May, 2012
Q. Our 22-year-old son is in the Navy. He is an E-5, so his earnings are fairly good. He is not married and has very few bills besides an apartment, vehicle and cellphone. He is contributing to the Thrift Savings Plan, but soon he will have option to contribute to the Roth TSP. I would like to know what your investment advice would be for him. A. He shouldn’t be as concerned about where he saves his money, as he is about how much he saves. The TSP, traditional or Roth, should be his first choice for retirement savings. If…
Q. I recently retired as a federal law enforcement officer at age 50 after 25 years of service. I am able to presently withdraw a monthly set amount from my Thrift Savings Plan without the 10 percent penalty, correct? May I also reduce the 20 percent tax withholding TSP imposes on me? A. Based on the information you’ve provided, you will be subject to the early withdrawal penalty unless you take your payments as a series of Substantially Equal Periodic Payments under Internal Revenue Service Rule 72t. There is no exception to the early withdrawal penalty for LEOs. The usual…
Q. I retired as a CSRS employee after 31 years of service. I will be 70½ in June and, as I understand, I will have to begin taking out from my Thrift Savings Plan account then. If I am reading the information correctly, I have until April 2013 to do this. If so, when is the deadline for me to send in my request for withdrawals? Also, I have checked the TSP forms on the website but could not determine the appropriate one to use. I am planning to take out my TSP savings in monthly withdrawals. A. Your first required…
Q. I will have 25 years of service soon but will only be 48. If the government offers early-outs, what will I be eligible for? Pension at one-quarter of my salary for the last three years? Health insurance? What if I get a part-time job? Will this affect my pension or annuity? Also, if I do an annuity on my Thrift Savings Plan, can I start that now? Will there be a penalty? Do I get this same amount for the rest of my life, or does it stop after a certain number of years? A. Reg Jones: Because you…
Investing for retirement income is different from investing purely for growth. Once you retire and begin withdrawing from your investments to support your standard of living, a single mistake can mean a significant compromise to your standard of living — if not today, maybe 10 or 20 years down the road when it’s too late to recover. Because of this fact, investing for retirement income is much more an exercise in avoiding mistakes, than an exercise in maximizing the potential for gains. Avoid the following common mistakes and you’ll be well on your way to maximizing the standard of living you’ll enjoy throughout…
Q. I am a federal employee, age 52. I established a Roth IRA several years ago and contributed to it until my income became too high. If I start contributing to the Roth TSP, can I roll over the discrete amount of my Roth TSP contributions at retirement to my existing Roth IRA, or do the rollover amounts follow the prorate distribution rule? A. You will be allowed to rollover the Roth money to your Roth IRA.
Q. I have been reading your column and am confused. There have been references to receiving a full lump sum payment of Thrift Savings Plan money upon retirement with 30 years of federal service without the 10 percent penalty. Is this true if I am 51 years old, retirement-eligible with 27 years as a law enforcement officer plus five years regular retirement service? A. No. The relevant exemption to the early withdrawal penalty has nothing to do with years of service but with age. You must retire during the calendar year in which you reach age 55 for it to apply.