Monthly Archives: January, 2013

Q. I’m 64 years old, planning to retire at the end of March, and after I retire, I’m hoping to take $20,000 off the top of my Thrift Savings Plan. Am I able to leave the rest for a later date? And what options do I have when I decide to tap into the remaining balance? Do I have to take the rest out in a lump sum or can I take it out in increments, like an annuity? A. You may take one lump-sum withdrawal. After that, your only option is a full withdrawal, either as a lump sum…

Q. If I am 52 years old and have all of my contributions in the L Fund now at 100 percent, and expect to retire in 2028, what would you recommend on how to distribute my percentages among the other funds? A. This is like asking what kind of car you should buy. The correct answer depends entirely upon what you expect the car to do. If you don’t know what to do, you can pick the L Fund that most closely corresponds to your life expectancy and use that. This is like choosing to buy a four-door sedan, though.…

Q. I plan on retiring in August at age 60 with over 37 years of service. I am under CSRS. I also contribute to the Thrift Savings Plan and started a Roth in December. Given that the feds are planning to “borrow” from the G Fund, would I be wiser to convert all TSP monies to Roth or withdraw and put into another IRA? A. I don’t think so. The law requires that the G Fund be made whole.

Q. I am 55 years old and in the process of obtaining Postal Service disability. I want to know the tax ramifications if I withdraw my Thrift Savings Plan at 55 after separating from service. I will have 24+ years in. I have $200,000 and want to make monthly payments, not based on life expectancy. I want to withdraw $1,000 a month at 55 for 25 years or so until it is depleted. Am I subject to any additional penalty taxes? I called TSP and the Internal Revenue Service and was told that because I am spreading the monthly payments over 10 years, they would…

Q. We were discussing Thrift Savings Plan withdrawals at work, and one guy asked why the withdrawals weren’t taxed at two different rates. Part should be ordinary income, and part should be taxed at the capital gains rate. Is this correct? Is that how it is taxed at tax time? A. TSP withdrawals are considered to be entirely ordinary income for tax purposes.

Q. If I leave the Thrift Savings Plan funds in TSP after I retire, I assume I am required to take required minimum distributions. Is this correct? If I leave the funds there and name trusts as beneficiaries, can a beneficiary then move the funds to an inherited stretch IRA after I die? A. Your TSP account is subject to RMD requirements once you reach age 70½ and are separated from federal employment. There is no simple, universal answer to your trust beneficiary question. It depends upon the trust, and you should consult an estate planning attorney before going down…

Q. I am planning on doing an age-based in-service withdrawal of all of my funds prior to retiring. I have a 10 percent contribution going into my Thrift Savings Plan account. Do I need to stop the contributions before withdrawal to make sure no more funds are put into my account after the fact? Or are they automatically turned off once my request is processed? A. You’ll need to stop your contributions.

Q. Federal employees now have the option of investing a portion of their Thrift Savings Plan contributions into the Roth option. As many of us know, contributions to the Roth TSP are from after-tax income. The benefit comes from tax-free earnings. The way I understand the rules, we must contribute to Roth for five years and not make any withdrawals until we are age 59½. The traditional TSP also uses the 59½ rule, unless we retire at age 55 or later. When we make withdrawals from our TSP account, the money is divided proportionately from both the traditional and Roth funds. For example:…

Q. Someone had a recent question about Thrift Savings Plan fund investment options in a speculative market, and I noticed in reading some of the comments at blog.federaltimes.com, a recommendation of “What’s safer than either the G or F Funds, alone, is a combination of all five funds at once. Without stocks, how are you going to hedge the risk of owning the G and/or F funds?” Doesn’t being in one of the L funds do that for you? Also, would you move your TSP funds out of the TSP at retirement into an IRA? A. Yes, the L funds…

Q. I would like to know a good allocation of my Thrift Savings Plan funds. I retired a year ago, and I am under CSRS. I have about $140,000 in the F Fund. I am 60 years old and do not need the money as of yet. I am looking for a fairly safe allocation within the funds for a 6 percent to 10 percent return. A. A good allocation will produce the maximum possible expected return in exchange for the level of risk it produces, and there are many such allocations. You should note, however, that there many more…

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