The Thrift Savings Plan is intended to fund retirement living expenses, but it might be necessary to tap it early to meet unexpected expenses. Frozen pay, furloughs, reductions-in-force and earlier-than-expected retirement can throw a monkey wrench into the best of plans. Of course, reducing your spending to avoid invading your TSP account should be your first tactic. A loan is another option, but there are limits on the amount you can take, and it must be repaid in installments. Sometimes a loan just won’t do the job. So, how do you get at that TSP money? If you have reached…
Author Mike Miles
Mike Miles
Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.
Q. I am 47 and hope to retire at my minimum retirement age in nine years. I contribute to both my traditional Thrift Savings Plan and Roth TSP. A publication I read, “Important Tax Information about Payments from Your TSP Account,” says you will not have to pay taxes for Roth contributions if you follow a two-step rule: Hold for five years + age 59½. But I think it also says that if I transfer my Roth TSP out of the TSP when I retire, the monies will not be subject to taxes. Is this correct? Can I only roll over…
Q. Many experts are indicating that there is a bond market bubble growing. In addition, The Wall Street Journal survey report indicates that interest rates will be going up about a point in 2014. For the next year or two, would it be best to move money out of the F Fund and place it in the G Fund, or move monies out of both funds and place them in market funds like C, S or I? Since both G and F are invested in bonds, will increasing interest rates affect invested funds negatively? A. I have been substituting G Fund…
Q. I am a federal law enforcement officer covered by FERS and, by Sept. 30, I will have more than 29 years of service plus more than a year of sick leave. To obtain my annuity beginning Oct. 1, I would like to retire on Sept. 30, but it is in the middle of a pay period. I plan on front-loading my Thrift Savings Plan and TSP catch-up contributions starting in April for the rest of this year to reach the maximum for both. Would there be any TSP match in my last, partial pay period, or should I just…
Q. Can traditional Thrift Savings Plan funds be transferred/rolled to Roth TSP funds after retirement, while paying taxes on the amount transferred? I’m trying to at least save the taxes on the five-year growth. A. You may not convert your traditional TSP funds to Roth TSP funds. I’d like to see the math that convinces you that this is a good idea in the first place.
Q. I will be 59½ this time next year. I would like to withdraw a one-time lump sum. What is the tax percentage rate I would pay in federal and state (Michigan) taxes? A. The answer will depend entirely on the tax code and your tax return for the year of the withdrawal.
Q. I been following the news about Cyprus’ banks. I want to find out if our Thrift Savings Plan I Fund money is invested in Cyprus’ banks. If yes, is it good to move money back to another fund? A. No.
Q. I am 64 years old and will be retiring in a year. I have 15 years with the federal government. Do all of my Thrift Savings Plan contributions have to be withdrawn prior to a specific age? I also understand that my total TSP account will be charged 20 percent. Am I to understand that after the 20 percent is subtracted from my TSP account, I have to pay income taxes per year for withdrawals I make from my TSP account that will be added to my total gross income? A. You will be required to begin taking minimum annual distributions…
Q. I am 66 years old and plan to retire in 2014, at which time I would transfer (convert) my Voluntary Contributions Program monies directly into a newly created Roth IRA. However, I have an existing (non-TSP) Traditional (substantial) IRA (never taxed), and know the Internal Revenue Service will aggregate my Traditional IRA balance for purposes of determining the taxability of this VCP-to-Roth conversion. If, prior to retirement, I (in 2013) transfer (direct rollover) my Traditional IRA into my existing Thrift Savings Plan account, will those monies now be considered 401(a), and therefore, making my subsequent VCP-to-Roth conversion occur with…
Q. I’m a 58-year-old FERS employee with 29 years of service. I have two years of leave without pay from while I was mobilized in the Army Reserve (2004-06). I am in the process of paying my military deposit to buy back this time. After returning to federal service, I did not identify that I wanted to catch up on the Thrift Savings Plan and get my TSP matching contributions. I recently read on the TSP website that I could still use the substantial contributions I made to the uniformed services TSP to request my civilian matching contributions. I have…