Q. I understand why you defend leaving your money in the Thrift Savings Plan because of low expenses, security, protection from lawsuits, etc. However, how do you address the issue of “locking in losses” when withdrawing money in retirement from the TSP? For example, in an IRA, I can have (for a basic portfolio) a cash fund, an income fund and an equities fund. I know I can do this in the TSP, as well, G/F/C or S, but the primary difference is when I go to withdraw my money, in the TSP it comes out of all of these…
Monthly Archives: August, 2013
Q. I am a FERS retiree who is below the age of RMD. I’ve often heard that a good way to invest TSP dollars is to choose the L Fund that corresponds with one’s life expectancy. My health and life outlook and family health history are pretty excellent. My personal assessment of my life expectancy is about 99 years. This would have me using the L 2050 fund. Is this foolishness? Should the L fund selected be strictly the actuarial or TSP-calculated life expectancy, rather than one’s own assessment of same? A. I think that, as long as your own…
Q. I am 39. I contribute 12 percent of my salary to the Thrift Savings Plan. I have 50 percent in the L Fund and 10 percent each in G, I, S, C and F. I plan to retire around 62. Is this a reasonable contribution distribution? A. On its own, it’s not risk-efficient. If you don’t have a good reason to use this allocation, then it’s not reasonable.
Q. I will retire at the end of this month. Already set the Social Security deal and retirement paperwork. If I retire now (tax year 2013) and ask for a big chunk of my Thrift Saving Plan in February (tax year 2014), will it affect my Social Security payment (as a windfall or any other way)? A. Not directly, but it can affect the cost of Medicare Part B. You should consult a tax adviser (who will prepare your return) before you proceed, if you’re not sure.
Q. I am 56 years old and I work for the Department of Justice. I expect to retire in the next year under CSRS. I have approximately $300,000 in the Thrift Savings Plan. I would like to withdraw $100,000 when I retire at age 57 to pay off a mortgage, and keep the remaining funds in TSP until I am 70. Is there any way to withdraw $100,000 before I am 59½ without sustaining a tax penalty? A. Yes. If you separate from service during or after the calendar year in which you reach age 55, your TSP withdrawals will be…
Q. I have a Thrift Savings Plan account as a CSRS retiree. I also turned 70½ this year and have non-Roth IRAs. Can I take a distribution from one of the IRAs that will satisfy the required minimum distribution calculation for my TSP account and all non-Roth IRAs? If so, would I still have to take a distribution from my TSP account just because I turned 70½? A. According to the Internal Revenue Service rules, you should be able to satisfy your entire RMD requirement using one or more withdrawals from any covered account or accounts. The TSP will automatically distribute its…
Q. I am retiring Aug. 30 and would like to pay my home off at this time. I have $107,000 in my account and the payoff for my home would be roughly $49,000. I plan to let the remaining balance stay there until 62 and receive monthly payments. My retirement is listed under FERS and, at 62, I will get Social Security (I have worked in the private sector for more than 30 years and expect my retirement pay to be nothing less than $1,000 a month, for a total income of at least $2,600 a month. Does this seem like a…
Q. I am 26 years old and I contribute 15 percent into my Thrift Savings Plan account. I have been reading suggestions on personal finance websites that I should consider placing a portion of my contribution into the Roth TSP to anticipate the possibility that I will be in a higher tax bracket around retirement. I was wondering what your opinion on this issue is and if it would be a good idea to place a portion of my TSP contributions in the Roth TSP. A. I’m indifferent without any evidence that it will further your interests. It’s impossible to…
Q. When does a nonfederal retirement fund (401(k), IRA, Substantially Equal Periodic Payment, etc.) qualify to be rolled over to the Thrift Savings Plan? Is there a time limit that such funds need to remain before transferring to a TSP account? A. Basically, the funds need to come from a tax-deferred retirement account and consist of only yet-to-be-taxed money.
Q. My wife is retired under FERS with a Thrift Savings Plan account and I, too, will retire at some point under FERS with a TSP account. Both of us have individual IRAs. Can each of us consolidate the IRAs into our own TSP accounts? A. Yes, as long as they don’t contain money that is eligible to be withdrawn without being taxed (tax basis).