Q. The Internal Revenue Service deferral limitation for 401(k) accounts is based upon a dollar limitation, which is the same for government and service members who contribute to the Thrift Savings Plan. For federal employees wanting to maximize their TSP contributions, this is a simple process on Form TSP-1: You merely take the current IRS limit ($17,000) and divide it by the number of pay periods (26) and you get the amount you should withhold in each pay period ($653.84). If you receive a step increase, or get promoted, or anything else that changes your pay, there are no effects…
Yearly Archives: 2012
Q. I served six years in the military and was honorably discharged in 2005. I can’t remember if I had a Thrift Savings Plan or not. Who can I contact? I’m receiving disability benefits through the Veterans Affairs Department. Would they know? A. Start by contacting the TSP (www.tsp.gov).
The most fundamental task in retirement planning is the management of risk. It is critical to identify sources of unacceptable, or catastrophic, risk and to neutralize these risks by either eliminating them or insuring against them, if possible. One potentially catastrophic risk often overlooked by federal employees is liability for damages stemming from their performance on the job. Any federal employee can be the target of a lawsuit filed by a private party for alleged violations of their legal rights. Most at risk are managers and employees who have frequent dealings with the public, such as those at the Department…
Q. I am 66. I was told that I can stop contributing to my Thrift Savings Plan, which I already knew, but still get the 1 percent from the feds. Can the fund be closed entirely without being penalized? The account has very little in it, and my retirement is next year. A. No, your TSP account will continue until you have retired and withdrawn all of its contents.
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…
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…
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.
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,…
Q. Can I move the total amount of money in the G Fund over to the L Fund? A. Yes, if you have not already requested two interfund transfers during the current calendar month.
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…