Q. In Reg Jones’ column, he states, “Choosing to buy an insurance policy instead of a survivor annuity is seldom a good idea. Could you please expand on that thought? The financial planner I talked to, who also sells insurance, says if you are healthy, the insurance route will be cheaper to pay for and more lucrative in the end. If you plan on dying young, the survivor annuity is best. A. This is a complex decision, and you should proceed with care since it is irreversible once it’s made. The simple answer is “guarantees.” The federal survivor annuity is the…
Monthly Archives: September, 2013
Q. I am almost 47 years old and have applied for disability retirement from my federal job. I have 27 years of federal service and am covered under FERS. It was my understanding that upon disability retirement, I will not be able to contribute to my Thrift Savings Plan account any longer and the funds would basically sit in TSP until I’m 59½ years old. For that reason, I’m considering rolling over my TSP to a traditional IRA, in which I can then make contributions to until I reach 59½. I’d like to know why leaving the funds with TSP would…
Q. I’m 68 years old (under FERS) and have a Roth IRA that’s external to the Thrift Savings Plan and has been open and funded for more than 10 years. I started contributing to my TSP Roth IRA this year. When I retire in 2015, I want to be able to roll over my TSP Roth IRA into my external Roth IRA without any tax consequences. I understand that I’ve clearly met the age requirement (older than 59½), but I want to make sure I also meet the five-year rule. Does the five-year rule apply to the time that funds were…
Q. I contribute 5 percent to my Thrift Savings Plan, ensuring that I get the full matching. I would like to contribute more to my retirement and am not sure whether to increase my TSP contributions or contribute to my IRA. Aside from the low overhead of the TSP, are there any fundamental differences between contributing to either one? Are there other particular benefits to investing in the TSP or the IRA that I should take into account? A. The TSP’s low cost and the availability of the G Fund make it the best retirement investment vehicle you’ll find. Without a good reason…
Q. I have to retire in 18 months. I plan on taking a lump sum and monthly allotment from my Thrift Savings Plan at retirement. I understand both of these will be taxed at 20 percent. I am thinking of taking a TSP loan for the amount I had planned on requesting as my lump sum prior to my retirement date, with the understanding that I won’t have the time to pay it back in full and that the amount I don’t pay back will be considered disbursed income. My reasoning is that having the funds now will allow me to…
Q. If I have Thrift Savings Plan funds in both G and C funds when I am required to begin taking required minimum distributions at age 70½, can I specify which funds the RMD are taken from? (My concern is that the C Fund may be at a low due to market conditions, and withdrawals may be better to defer till the market improves.) A. TSP distributions are always taken proportionately from your various holdings at the time. I don’t see the rationale for your concern, though. Your account will be allocated exactly as it was before the withdrawal. If…
Q. I’ve been in the government for four years (retired Army) and have invested in the Thrift Savings Plan since 2009. I plan to retire from the government in 2020 with 11 years of service (I’ll be 58). My TSP portfolio is diversified but certainly heavy in the C and S funds. To avoid the losses all experienced several years ago, what are the recommended allocation moves, within funds, that one should take during what appears to be a stock market selloff that has started in August? A. Unless you plan to withdraw and spend all of your money within the next few…
Q. I took out all of my money from my Thrift Savings Plan and put it in an IRA. Now I have lost a lot of money. I retire in January. Can I have the bank put my money back in my TSP account? If so what do I need to do to make this happen? A. You should be able to do this if your TSP account is still open. If you emptied it earlier, this is no longer an option for you. You could, however, move the money to a discount broker and use Exchange Traded Index Funds…
Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits in regard to the Thrift Savings Plan and what I do with the money in the TSP (when do I have to take withdrawals, etc.)? I am a Defense Department civilian, age 53, with 35+ years of service under CSRS. A. Early retirement does not affect the rules governing access to your TSP account. The usual rules apply and they can be found at www.tsp.gov. In particular, you should understand the information contained in this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You’ll be subject to the early withdrawal penalty unless…
Q. I plan to retire in December 2014, when I will be 60 years and six months old. I plan on drawing the special retirement supplement for about 1½ years. I would be taking approximately $1,000 a month from my Thrift Savings Plan. Would the amount I receive from TSP be counted as earnings toward my $15,000 yearly limit? Also, when I start to draw my regular Social Security check, will the amount I receive from TSP be counted as income also? A. Mike: Your TSP withdrawals are not considered earned income for the purpose of means testing either the…