In managing your Thrift Savings Plan account, you have one way to succeed and two ways to fail. You can succeed only by achieving your goals with little or no forced compromise along the way. You can fail by either failing to achieve your goals, or by living further beneath your means than necessary — in essence by being too cautious — and leaving money “on the table” in the end. Retirement investing is ultimately about producing cash flow — money to spend when you need it. This is also referred to as liquidity. What good is it to be…
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 just retired at 55 from the Postal Service. Can I roll over a traditional IRA into my Thrift Savings Plan? A. Yes, as long as the IRA contains no after-tax money.
Q. Your Sept. 24 column in Federal Times made the suggestion to increase allocation in the G Fund at the expense of the other funds, including the F Fund. I have not normally been heavily invested in the F Fund in my 25 years. However, with the F Fund having the second-highest return of any fund since its inception (5.86 percent); that it has never had a negative yearly return; that there is a continually declining performance of the G Fund; and the low probability that interest rates will go up any time soon, I see the F Fund as…
Q. My wife is retiring Oct. 26. I hear that it is taking six or more months to finalize your retirement and receive your first retirement check. Can she begin receiving payments from her Thrift Savings Plan account as soon as she retires or does she have to wait until she receives her first retirement check and her retirement is finalized? She would like to start receiving monthly payments in January. A. As soon as her agency notifies TSP that she has separated from service, TSP will process her request for monthly payments.
Q. I left federal service (did not retire) at age 57. If I opt for a lump-sum payout, will I just be taxed 20 percent? I keep seeing the additional 10 percent tax before age 59½. Also, are there additional taxes to be paid if I do not roll over into a traditional IRA? A. You will be exempt from the early withdrawal penalty since you separated from service during or after the calendar year in which you reached age 55. If you do not roll your withdrawal over, it will be taxed as ordinary income when you file your tax return for…
Q. I have been in the service 15 years and plan on being in for at least five to nine more years. I have been putting in 26 percent monthly to the Thrift Savings Plan for the past five years. I have three Roth IRAs, as well. Should I start the Roth TSP, put in $13,000 to $15,000 a year, continue my Roth IRAs and move all my funds from my regular TSP to Roth TSP? A. I can’t tell you what you should do, since I don’t know enough about your situation to do so responsibly. In general, I recommend…
Q. I am a retired CSRS employee, age 62. I am considering converting my Thrift Savings Plan balance of about $205,000 to an IRA with Fidelity. What are the advantages and disadvantages of making this conversion? What considerations should I look at? A. The disadvantages include higher costs, greater complexity and the loss of access to the G Fund. The advantage might be more flexible withdrawal options. I recommend against this move unless, for some reason, you have no choice.
Q. If I retire after 10 years of service, which would make my age 56.4, would I be able to start withdrawing from my Thrift Savings Plan without a penalty? If so, am I allowed to withdraw a larger amount per month and then lower it when I start getting my Social Security benefits at age 62? How often am I allowed to change the amount I withdraw per month? A. If you retire during or after the year in which you reach age 55, your TSP withdrawals will be exempt from the early withdrawal penalty. You may change the…
Q. If I agree to make Substantially Equal Periodic Payments available under Internal Revenue Service code section 72(t) from my TSP, may I do so before I retire and avoid the 10 percent penalty? If it matters, I am a federal law enforcement officer who will have 25 years of service before age 50. A. No, since you’re not allowed to initiate monthly payments before you retire. The 72(t)-compliant distributions will avoid the early withdrawal penalty whenever they are initiated, however.
Q. My husband and I are both federal employees. My husband is 30 and has 10½ years. He contributes to the G Fund and, from what I can tell from our leave and earnings statement, it is 5 percent. I am 28 and have three years. I also have a 5 percent contribution to G Fund per our LES. What fund do you recommend we contribute to? We would like to start now to ensure we have a decent retirement. Do you recommend us investing in the new Roth? A. You should contribute as much as you can afford to…