Q. I am a federal employee, almost 30 years old and contribute to my Thrift Savings Plan, as well as a Roth IRA toward retirement. I contribute the maximum to my Roth IRA at $5,500 a year and contribute 15 percent of my $82,500 salary (approximately $12,500 a year). I have a comfortable emergency account, life insurance, $500 per month to a 529 plan for my 1-year-old, on top of the basic necessities. How much should I be contributing if I can’t max both my TSP and Roth IRA? Should I continue with this allocation, or should I be maxing…
Monthly Archives: January, 2014
Q. I read your article about how an adviser should be free from conflict on interest, competent, concerned and affordable. I just smiled, because they all will tell us what we want to hear. The question should be, how do you know if he or she is honest and telling you the truth? Is there a simple way for us non-experts to check them out? A. There is no simple way, but here are some key requirements: A good adviser should be a Registered Investment Advisor and NOT a Registered Representative of a Broker Dealer, an insurance agent or bank…
Q. In your recent column “4 keys to TSP success,” you mentioned, regarding asset allocation, to “diversify your holdings among cash, stocks and bonds to hedge the risk lower.” I agree with this approach wholeheartedly, but ask where in the TSP to keep “cash”? There is no money market option, just the L funds (which I don’t use, preferring to personally allocate my investments), and the G, F, C, S and I funds. By the way, I took everything out of the G Fund and ceased all future allocations to it when there was a proposal by our leaders last…
Q. I am thinking of retiring in about a year and will have approximately $310,000 in my Thrift Savings Plan account. The remaining cost of my mortgage is going to be about $140,000. Is using the TSP funds to pay off the mortgage an option? How much would I be taxed if I opted to go this route? If this does not sound smart, please suggest a smarter idea that I might use. A. It is an option, but the money will be taxed as ordinary income and may be subject to the early withdrawal penalty, depending on your age.…
Q. If I am contributing to a traditional Thrift Savings Plan, can I now change my future contributions to a Roth TSP, or do I have to wait until open season? A. You may start, stop or change your TSP contributions at any time.
Q. My mother’s plan was purchased by MetLife. She wants to make a withdrawal but is told she can’t, or she needs a higher monthly payment. It’s only $300 due to a paperwork mistake, but she was told she could only submit this one time this year. Is there anything to do? A. If she bought an annuity, her monthly payments from that annuity are fixed for life. If she has a balance left in her Thrift Savings Plan account, she has the option of terminating her monthly payments with a final, lump-sum distribution of the remaining balance in her…
Q. What is the percentage of return if I invest the balance of my Thrift Savings Plan account in the annuity provided by TSP? A. The monthly payment depends upon your circumstances and the interest rate environment when you purchase the annuity. You can run a quote at www.tsp.gov. The return on investment from a TSP annuity can’t be known in advance, however. You’ll have to wait until the payments stop to figure it out. To illustrate, what if you buy a single life annuity with no refund and then die right away? Your return on investment will be hugely…
Q. I know that after reaching age of 70½, I have to withdraw a minimum requirement from my Thrift Savings Plan account. Will I be able to keep the rest of my TSP money in that account? A. Yes.
Q. I will be retiring at age 52 with 27 years as a law enforcement officer. If I do a partial withdrawal of the Thrift Savings Plan for down payment on a house, I know I pay taxes. I also would pay a penalty as I would be taking the partial withdrawal before age 55. Is the penalty 10 percent or 20 percent? Is the penalty directed at the entire amount withdrawn or toward the amount after taxes? A. The penalty is 10% of the gross amount.
Q. At age 59½, I would like to take an in-service withdrawal in June of about $100,000 from my Thrift Savings Plan. I plan to retire in December at age 60. Once I take the one-time, in-service withdrawal, can the rest be set up on monthly payments after I retire in December? A. Yes. Monthly payments are a form of full withdrawal.