Q. I’m 72, and I must make a decision on Thrift Savings Plan withdrawals. I do not need any additional monthly income. Is there any advice/guidance on what options are best to take? Is it better to take a TSP annuity or to purchase one from another insurance company? A. I don’t know why you’d use your TSP assets to buy an annuity if you don’t need income, particularly with interest rates so low. I suggest you manage your TSP and have them send you the Required Minimum Distribution each year. You can then reinvest the money, after taxes, in a taxable account.
Author militaryonline
It’s often said that it doesn’t pay to try to time the investment markets. However, we are in a situation now that makes one particular timing move a good bet for Thrift Savings Plan investors: moving some money out of the F Fund and into the G Fund. The G Fund, a unique investment fund available only to TSP participants, guarantees to give you back whatever money you put into it, on demand, without risking the loss of your principal — like a money market fund. In other words, it’s liquid. But unlike a money market fund, which typically pays…
Q. It is my understanding that if you retired in the year you turned 55, you never pay 10 percent penalty on Thrift Savings Plan withdrawal, correct? A. Correct.
Q: I am retired from the U.S. Postal Service and I am receiving full withdrawal monthly payments from my Thrift Savings Plan account. Is there or will there ever be a chance to change that decision and purchase an annuity through MetLife A: Yes. You may use form TSP 70 to complete a full, final withdrawal and direct the proceeds into a MetLife annuity.
Q: I am 62 years old and will retire this year under the Civil Service system after 41 years. I want to take all of my TSP out to pay off my second trust on my home this year. I was told when I withdraw my TSP I will pay a 26 percent withdrawal tax. Will I also have to pay an income tax on that money when 2011 income taxes become due? A: Your withdrawal will be subject to 20 percent tax withholding, which will be applied as a credit against your tax liability when you file your tax…
Q: I am a 54-year-old FERS employee who will be forced to retire soon. My 6.2 percent mortgage will eat up over half my pension. Would it make sense, upon retirement, to withdraw enough from my TSP to payoff the mortgage and leave the remaining funds? I will need 65,000 and have about 170,000 in my TSP. A: Whether it’s a good idea or not will depend upon how the move fits into your overall retirement strategy. Without a clearly defined strategy for managing your resources through retirement, it is impossible to say whether the move will help or hurt.…
Q: In the March 7th issue of Federal Times, on Page 20, there appears a TSP SNAPSHOT which has the following entry: Individual funds C Fund March 3 $16.15 Year-to-date 6.18% Last 12 months 21.34% Am I really receiving a 21.34 percent return for funds in the “C Fund” for the last 12 months? I am able to get only 1% to 2% return on a CD for a year. The 21.34 percent just seems too good to be true! Am I misinterpreting what I see? A: The calculated rate of return was correct. Remember that this rate of return…
Q: I understand that the Thrift annuity payment is for life. Does that mean until death? As a FERS retiree, will my Social Security annuity be reduced based on how much I have in my retirement fund (frozen CSRS) and/or Thrift account? A: Is this a trick question? Yes, a life annuity means that payments continue, on an accrual basis, until the annuitant’s death, unless a survivor benefit option is elected at the time of purchase. In that case, the payments continue until the survivor dies, if later. Your Social Security benefit might be reduced by the Windfall Elimination Provision…
Q: I have heard that my friends are having more taken out for federal tax on their IRA or annuity accounts. Mine remain the same. Does that mean I’ll owe money next April? I thought the Bush tax cuts were extended. A: Withholding and the actual tax you wind up owing are two different things. I can’t tell you whether you’ll owe money in April, but the more you contribute during the year, the less likely you are to have to pay later.
Q: I retired from federal service Jan. 1, 2010, under CSRS. In April last year I received a full distribution from my TSP account. I live in Pennsylvania and am interested to know if I’m responsible for paying state tax on my full TSP ditribution. A: My review of the Pennsylvania rules leads me to understand that TSP income is not taxed if you are retired and at least 59½ years old when it is taken. You should consult a PA/CPA to be sure, however.