Q. I am 29 years old and serve in the Air Force. I contribute the maximum $5,000 amount to my Roth IRA every year, and have a few thousand dollars in the standard Thrift Savings Plan. I am concerned about the lack of investing options besides the G, F, S, C, I and L funds within the TSP. With the new Roth TSP option, would it be possible for me to continue to contribute $5,000 directly to my Roth IRA, then contribute $17,000 to a Roth TSP, and finally roll that $17,000 over to my Roth IRA each year? A. Your participation…
Monthly Archives: September, 2012
Q. I am going to retire with 25 years covered law enforcement. Is there a penalty for withdrawing from the Thrift Savings Plan if I have not yet reached age 55? I heard as long as you are in a covered law enforcement position, there is not penalty? A. What you’ve heard is wrong. If you separate from federal service before the calendar year in which you reach age 55, you will be subject to the early withdrawal penalty. There are ways around the penalty, however, and they are described on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.
Q. I attended a seminar given by MetLife Financial people about Roth TSP, IRAs, etc., and was told that even if I am working at 70½ and not retired that I still have to make a withdrawal of my TSP percentage. However, in the booklet “Withdrawing Your TSP Account” on Page 3 under withdrawal deadlines, it states in the second sentence: “If you are still a Federal employee employed at 70½, your required withdrawal must be by April 1 of the year following the year you separate.” I told the lady what our TSP booklet said, but she said it…
The strong performances of the Thrift Savings Plan’s C, S and F Funds over the past two years should be making you nervous. I know it makes you feel good when your TSP account’s value is hitting new highs, but that’s an emotional, rather than a rational, response to what has happened. The value of large U.S. corporations has risen significantly from the economic crisis low in 2009. In fact, even without dividends, the S&P 500 index, on which the C Fund is based, has doubled in value since then and is now nearing the highs it set in 2000…
Q. I have the same question as I found on your site: “Q. I would like to take a portion of my Thrift Savings Plan balance and transfer it to a self-directed IRA. What is the process for doing that? What are the estimated costs and penalties? A: In your circumstances — actively employed and younger than 59½ — the TSP won’t allow this.” But I am 61 years old and in civil service for 34 years. You imply in the above answer that over 59½ might be OK. Do you recommend this, or can there be possible problems? A. You could…
Q. On June 26, I took out a $22,000 loan against my 401(k) plan for major home improvements. That equaled up to $376 per month taken out of my paycheck to repay this loan. Then, Aug. 1, my hours were temporarily reduced until the end of 2012 to 30 hours per week, which amounts to an additional $620 deducted from my pay monthly. This puts a serious hardship on my ability to pay my monthly obligations. Is there a way to legally stop payments to my 401(k) repayment, seeing as I had no idea my hours would be reduced, whereby affecting my ability…
Q. My understanding is if I withdraw using a loan from my Thrift Savings Plan (say a residential loan) shortly before I retire and under 59½ years old, and then I retire or turn 59½, I get a 10 percent tax penalty because the loan was taken when I wasn’t eligible for a withdrawal without penalty. It seems a little contradictory because I could pay off the outstanding amount and then take an unpenalized withdrawal after retirement or 59½. Am I reading this rule correctly? A. No. If your unrepaid loan balance is declared a taxable distribution, it is counted as…
Q. I’m looking to retire in 18 months and don’t know who to trust when making a decision to keep money in the Thrift Savings Plan, do a mix with a traditional IRA, or take it all out and put 100 percent in a traditional IRA? A. I can give you one recommendation that may solve your problem: Leave your money in the TSP and manage it there for as long as possible. In fact, if you have eligible retirement plan accounts outside of the TSP, you should move them into the TSP. Anyone who tells you otherwise is either…
Q. I’m active-duty military, maxing out one Roth IRA. I was interested in opening a Roth TSP, as well, but a financial adviser at my bank recommended opening a second Roth IRA in my wife’s name and maxing it out first before contributing anything to a Thrift Savings Plan. This struck me as odd because it would leave my retirement money spread over three separate accounts. I couldn’t max out the TSP but could probably contribute more than $5,000. Is my financial adviser (free service from the bank) right or just trying to get me to open another IRA at…
Q. I just changed my contribution allocations from 100 percent G Fund to 100 percent L Fund 2030. Would it make sense to transfer my fund balance that I earned with G Fund to the L Fund? A. It’s impossible to give you reliable investment advice without the proper analysis and understanding of your unique circumstances, goals and constraints. How you manage your investments should depend directly upon what you expect that money to do and when. In general, though, unless the G Fund is holding money that is to be spent within the next few years, or that is part…