Monthly Archives: July, 2012

Withdraw from Roth or TSP?

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Q. I’m 52 and a recently retired FERS law enforcement officer. I plan to leave my Thrift Savings Plan alone for at least two more years ($500k+ balance) and then do a 72T Substantially Equal Periodic Payment withdrawal. However, I may need approximately $30K to $40K, probably in 2014, before I do the 72T SEPP withdrawal. Would it be better to do the one-time partial TSP withdrawal, or withdraw from my Roth IRA contributions (tax-free)? I have approximately $140K in the Roth. A. This is really a question for your tax preparer after a look at some pro forma returns…

Changing monthly TSP withdrawal amount

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Q. As a federal law enforcement officer with 25 years of service, can I retire at the age of 47 and withdraw monthly payments from my Thrift Savings Plan balance based on life expectancy without paying a 10 percent penalty? If so, can I change this at 60 years of age to a specific dollar amount monthly payment without a penalty? A. Yes, as long as they continue, without interruption or error, until you reach age 59½. After that, you may change the payments without penalty. The rules for avoiding the penalty are complex and strict, so you should consult…

Changing TSP contribution

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Q. I will retire from the Postal Service this summer. Can I change my contribution to the Thrift Savings Plan to several thousand dollars on my terminal leave check to allow me to not pay taxes and increase my TSP account balance? Congress has not yet finalized this proposal. A. No.

Election and TSP

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Q. I am sure the upcoming elections will affect the market, as elections always do. What would be the recommended fund to put my money into for this? I have 13 years until I plan to retire, but I want to maximize earning without taking too big of risk. Right now, I have about 90 percent in the C Fund the rest in the S Fund. A. Assuming that your Thrift Savings Plan is your only investment account, your current allocation is unnecessarily risky and inefficient. If you’re not a competent investment manager, and your question hints that you’re not,…

Buyout questions

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Q. I qualify for a buyout with 25-plus years of service. If I take the buyout, it is my understanding that I must wait until my normal minimum retirement age of 56 to begin receiving the Social Security supplement. Would this prevent me from receiving increases in Social Security supplemental benefits that I would have received had I waited until 56 to retire? I believe I would get the increases at 62, in any event, when I could first draw reduced SS benefits. Also, what happens to my Thrift Savings Plan account? May I purchase an immediate annuity and/or take a…

Disability retirement, tax rates and penalties

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Q. I retired on disability in March 2007. I turned 58 on May 15. What tax rate will I have to pay at 59½ years of age, and what penalty would I pay for withdrawing before then? A. The rules can be complex, depending upon your circumstances. I suggest that you read the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf and then I’ll answer any remaining questions you may have.

Pulling retirement and redepositing

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Q. My wife and I pulled our retirement in about 1994 or later and invested. The market didn’t help it grow, given the lost decade and other downturns in the economy. I had previously converted mine to a Roth (bad idea). Now I’m 63 and hoping to retire in three to five years unless something worse happens in the next two fiscal years. My wife is nine years younger. We deposited our retirement pulled from other employers into the Thrift Savings Plan, which in both cases is probably larger than if we had kept our federal retirement where it was.…

TSP payments, withholding rate and tax liability

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Q. I will retire this year at age 70 and will request one on the following: 1.)  monthly payments for 10 years or more, or  2.) monthly payments based on the Internal Revenue Service’s life expectancy table. My withholding rate will be the same as if I were married with three children but at what tax percentage? Let’s say my annual payout is $10,000. What is my annual tax liability as it pertains to Thrift Savings Plan payments? Will I be paying less than 10 percent? A. The default withholding rate is not fixed and will depend upon the amount of the distribution. You…

Moving money around

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Q. If I move an amount into the G Fund and set up a monthly withdraw equivalent to it, can I leave the remaining amount in a different fund and, if needed, move it around also? A. Your withdrawals will be taken proportionately from each of the funds held in your Thrift Savings Plan account at the time the withdrawal is processed.

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