Q. I will have 25 years of service soon but will only be 48. If the government offers early-outs, what will I be eligible for? Pension at one-quarter of my salary for the last three years? Health insurance? What if I get a part-time job? Will this affect my pension or annuity? Also, if I do an annuity on my Thrift Savings Plan, can I start that now? Will there be a penalty? Do I get this same amount for the rest of my life, or does it stop after a certain number of years? A. Reg Jones: Because you…
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.
Investing for retirement income is different from investing purely for growth. Once you retire and begin withdrawing from your investments to support your standard of living, a single mistake can mean a significant compromise to your standard of living — if not today, maybe 10 or 20 years down the road when it’s too late to recover. Because of this fact, investing for retirement income is much more an exercise in avoiding mistakes, than an exercise in maximizing the potential for gains. Avoid the following common mistakes and you’ll be well on your way to maximizing the standard of living you’ll enjoy throughout…
Q. I am a federal employee, age 52. I established a Roth IRA several years ago and contributed to it until my income became too high. If I start contributing to the Roth TSP, can I roll over the discrete amount of my Roth TSP contributions at retirement to my existing Roth IRA, or do the rollover amounts follow the prorate distribution rule? A. You will be allowed to rollover the Roth money to your Roth IRA.
Q. I have been reading your column and am confused. There have been references to receiving a full lump sum payment of Thrift Savings Plan money upon retirement with 30 years of federal service without the 10 percent penalty. Is this true if I am 51 years old, retirement-eligible with 27 years as a law enforcement officer plus five years regular retirement service? A. No. The relevant exemption to the early withdrawal penalty has nothing to do with years of service but with age. You must retire during the calendar year in which you reach age 55 for it to apply.
Q. I have 25 years in civil service. I have a Thrift Savings Plan account and, once I retire, do I get an annuity automatically or do I have to use the money in the TSP account to get that? Should I buy an annuity or just take a monthly payment from the TSP account? Not sure if I will have enough to retire. I heard that in FERS, the government gives an annuity and then you get TSP. But when I go to the website to estimate how much I have in the TSP, I do not see the…
Q. I am under the FERS retirement plan. In four years, I will be 57 with 30 years. Will I be penalized in any way? Also, will I be able to tap into my Thrift Savings Plan? A. Reg Jones says: Because you will be retiring at your minimum retirement age with at least 30 years of service, you’ll receive a full, unreduced annuity. Mike Miles says: You’ll have access to your TSP account after retire without penalty.
Q. Can I retire from the Veterans Affairs hospital under FERS at age 55 with 25 years of service and withdraw my Thrift Savings Plan in lump sum. Or do I have to wait until I am MRA? Can I leave at 55 and defer my retirement until I reach my MRA at 56? A. Reg Jones says: You can’t retire until you reach your minimum retirement age, which is 56. If you retired then, your annuity would be reduced by 5 percent for every year you were under age 60 (5/12 of a percentage point per year). You could…
Q. I have some money in a traditional Individual Retirement Account that is doing nothing for me, and I was wondering if I could transfer it to my Thrift Savings Plan account. I invested roughly $44,000 in June 2008 and, as of March 30, I have a grand total of $46,190 in the account. I am also paying an annual fee of $344 for this IRA. In the same time frame, I made over $30,000 in my TSP account. I realize I will lose about $2,500 in the transfer, but I feel I can make that back up in no…
Q. I am a Postal Service employee, age 57, and I currently contribute $6,000 a year to a Roth Individual Retirement Account. Am I also allowed to contribute to the Thrift Savings Plan, or would that be considered an excess contribution? A. You are permitted to contribute the maximum to the TSP, but, depending upon your circumstances, this may limit your ability to contribute to a Roth IRA. See Internal Revenue Service Publication 590 for the rules.
Q. I work as a CSRS federal employee, 60 years old with 35 years of federal service. There is $200,000 in pretax money saved in my Thrift Savings Plan account. I’m interested in taking advantage of the “one-time” age-based in-service withdrawal option. Can I choose any amount to withdraw? For example, my plan is to take out $100,000 and roll (100 percent) directly into my private Individual Retirement Account and invest in stocks. Is it also correct to assume that I can move money from my IRA pretax account into my TSP account (any time and any amount) as long…