Q. I am interested in seeing if the Thrift Savings Plan can be managed on a bucket type of withdrawal strategy. I realize it would take an act of Congress to get the rules changed. Can you identify the member of Congress whose pet project is the TSP? A. No, but you can use a “bucket” strategy in the TSP now. Just allocate your account the way you’d like, take your withdrawal and then rebalance your account. The “bucket” strategy is just another way to look at an asset allocation strategy. Even if you use “buckets” for your money, there…
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. Does the Fed’s announcement that it will not raise interest rates until unemployment reaches a specific target make the Thrift Savings Plan F Fund more attractive in the near term? A. To the extent that it reduces the probability that market interest rates will rise, it reduces the F Fund’s downside risk. With interest rates near zero, and most outstanding bonds trading at a premium, I’m not sure that I’d call the F Fund particularly attractive, however.
Q. I plan to retire in 2013. I am 58 years old. If I want to pull from my Thrift Savings Plan will I have an early withdrawal penalty? A. No.
Q. I am retiring from the Army after 22 years of service and I am 45 yrs. old. Can I start withdrawing from the Thrift Savings Plan and avoid the early withdrawal penalty by taking a series of Substantially Equal Periodic Payments? How does that work? My life expectancy is 37.7 more years, according to the Internal Revenue Service, so is that the number of years my funds can be distributed? If so, do I then divide what I saved by 37.7 and again divide by 12 to see what my monthly payments would be? A. You may avoid the…
Q. I am a U.S. Capitol Police officer. I plan to retire in 2014 at age 55, although I can stay until 57. If I convert my TSP funds to an annuity, will I be able to draw on it right away? If not, when? Will I be penalized prior to age 62? A. If you retire during or after the calendar year in which you reach age 55, you will be exempt from the early withdrawal penalty for all of your TSP assets as you withdraw them and may take them within the usual TSP limits, including using some or all…
Q. I plan to retire under FERS law enforcement on May 30, contributing my full $17,500 and $5,500 catch-up contribution in my first 10 to 12 paychecks. If I purposely make larger contributions early in the year in an attempt to reach the annual maximum contribution before retiring, will I lose out on agency matching contributions? A. Not if you spread the contributions out evenly over the duration of your remaining employment.
Q. I am retiring Jan. 23 from CSRS. Hence, I will be paid in 2013 for about 1½ pay periods. Can I have all of that pay go to the Thrift Savings Plan, tax-deferred? Can I also have my lump-sum annual leave payment go to TSP, tax-deferred, up to the annual limits? A. Your pay can be deferred into the TSP, but not your leave payout.
Q. I am a retired government worker who has contributed the maximum amount to the Thrift Savings Plan. After being retired for several years, I transferred the TSP to a traditional IRA. If I convert the traditional IRA to a Roth IRA, how do I figure my “basis” in the IRA to determine the amount that is taxable? A. If the only thing you ever put into the IRA was your traditional TSP assets, then the account has no tax basis and is all taxable upon distribution (or conversion). If you have contributed nondeductible or other after-tax money to the…
Q. For tax purposes, is it better to take a monthly payment which will result in depletion in less than 10 years, or make it go longer than 10 years? Say, an amount of $250,000. A. It’s impossible to say, for sure. The best you can do is make some assumptions about the variables involved and run pro-forma tax returns for the next 10+ years. It might be a good idea to just take what you’ll need.
Q. I am a CSRS employee with less than eight years left until retirement with a Thrift Savings Plan balance of over $200,000. Should I move all of my money to a “safe” fund for the next six months or so until this fiscal cliff mess is cleared up? Looking not to lose money this time, so which fund is the smartest to move my TSP funds to? A. When was the last time it seemed safe to invest? There’s no such time. That’s the problem with timing out of the markets: You then have to time back in or…