Q. I am a FERS retiree who must begin taking my required minimum distribution in 2013. I am contemplating receiving monthly payments based on my expected life expectancy, but I need to know whether an initial decision to do so locks me forever, or whether, say in 2014 or 2015, I can change to monthly withdrawals based on an amount set annually. If the Thrift Savings Plan allows the later switch, are there barriers to my later going back to monthly payments based on life expectancy? A. You may change from life-expectancy payments to fixed-dollar payments one time only. You may…
Yearly Archives: 2012
Q. I plan to choose an annuity for my Thrift Savings Plan savings that will pay my spouse half if I die. What happens to the balance of my money in TSP if we both should die shortly after the annuity is activated? A. If you select and pay for the cash refund option, any unrecovered premium will be paid to your beneficiary(ies) as a death benefit. If you do not purchase the cash refund option, then annuity payments stop and no death benefit is paid.
Q. Can Thrift Savings Plan funds left to a beneficiary be stretched as they can in an IRA? A. Yes. See the brochure at https://www.tsp.gov/PDF/formspubs/tspbk31.pdf for more information.
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…
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…