Q. I am concerned about the fiscal cliff. Should I borrow from my Thrift Savings Plan to cover future bills? I have about one month of savings, but beyond that, my family will not make it. I can always pay it back in full if a bargain is reached. Just not sure what to do. A. It doesn’t sound like you have a choice.
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 46 with 22 years of service, and have been told that I will soon receive a letter of directed reassignment to a job in my same grade far outside my commuting area. When the letter arrives, if I should decline to move to the new position, what are my options for drawing retirement? How about insurance? Severance pay? What about my 401(k) in the Thrift Savings Plan? My performance ratings are not an issue. A. Mike: Your circumstances will not affect the usual rules that apply to your TSP account. As long as you remain employed, you will be…
Building and managing a Thrift Savings Plan account is like mining for coal. It takes expertise, ability and the right tools to do the job right and safely. If you don’t know what you’re doing, going to the store for more dynamite probably isn’t going to help you be more successful, and will probably just get you into trouble. In the case of your TSP account, if you know what you’re doing, you should realize that you don’t need more investment options to do the job right. You already have what you need to do the job the TSP was…
Q. My husband and I are both retiring soon, he under FERS and me under CSRS. His income will be made up mostly of Social Security, while mine will be mostly CSRS. A full annuity for him would cost $425 a month. Does it make sense to elect this annuity given the cost? Would a term life insurance policy be a better alternative? I need to put the paperwork in this week. A. There is no universal answer to this question, but if in doubt, the safe bet is to elect the full survivor benefit for your spouse. To answer this question properly would take…
Q. Are there income limitations on a Roth TSP? For example, can a single person with an income greater than $127,000 contribute to a Roth TSP (in 2013)? A. The contributions are not affected by the size of your income.
Q. I’m pretty pleased with the Thrift Savings Plan returns and would like to know if I can deposit any after-tax money into the TSP. If I have a $100,000 in a CD, can I withdraw those funds (and pay the taxes) and deposit them into my current TSP account? A. No, but you may transfer your 401(k) assets into your TSP account if all of the money in it is taxable upon withdrawal. Use Form TSP-60 and follow the instructions there.
Q. If I have both a traditional and a Roth TSP, can I elect to have all of my contributions (6 percent) go to the Roth account, and still receive the 5 percent matching contributions (FERS employee) that I have been receiving? Is there a required minimum of my contributions that must go to the traditional account? A. The matching formula applies to all of your deferral contributions, Roth or traditional.
Q. I was a federal employee for 10 years, and I want to make a withdrawal of a portion of my funds. How badly will I be penalized for making the withdrawal? I went through a divorce as of Nov. 7, and I am in hardship of funds. A. The answer depends upon your circumstances. If you are talking about the Thrift Savings Plan, you will be subject to the 10 percent early withdrawal penalty on any earnings if you are under age 59½ and don’t qualify for at least one of the exceptions listed on Page 7 of the…
Q. What factors determine whether it is better to pay insurance premiums with pretax dollars or waive that and pay with after-tax money? My thought is that by paying with after-tax money, taxable income is increased, thereby increasing the Social Security entitlement. How do you determine if that is more beneficial than the reduced tax liability now? A. The answer depends on your circumstances and a number of assumptions about the future. The issue is discussed on the Office of Personnel Management website at www.opm.gov/insure/archive/health/pretaxfehb/qanda/23.asp.
Q. I will be eligible to retire Dec. 4 with both minimum retirement age and years of service under FERS. I would like to wait until Jan. 31 to retire to complete a project. I will have 240 hours of annual leave going into 2013. The combination of my lump-sum payment for my annual leave and my January wage earnings would exceed the Social Security earnings limit for 2013. Since the Social Security earning limit is the same as the FERS annuity supplement earnings limit, would this make me ineligible for the special retirement supplement for 2013? If I put all…