Q: Upon FERS retirement can I roll all my TSP into a hybrid annuity with an 8 percent floor? A: Yes.
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 pretty sure I know the answer to this question, but I thought I’d ask anyway. Is there some kind of penalty for a federal retiree to leave their TSP with the government at age 65 plus? A friend of mine told me that a man who is about to retire attended a retirement seminar and was told that if you leave your TSP with the federal government at age 65 you would be assessed a penalty. I do not believe this is the case. A: Not true. In fact, you won’t find a better deal anywhere else.
Q: I am retired and have not withdrawn money from my TSP as of yet. It is my understanding that if I should die tomorrow, my spouse would inherit the full amount of my TSP. But when I looked into beginning monthly withdrawals from my TSP, it seemed to say that I had to buy an annuity with my spouse being the beneficiary of 50 percent in the event of my death. Why would my spouse not inherit the full amount? A: You don’t have to buy an annuity to initiate monthly payments from your account. Use Form TSP-70 to request automatic…
Q: It seems to me that the CSRS voluntary contributions program is the undiscovered gem of the CSRS system. I have already heard that the VC program can be used as a way to beef up a Roth IRA. However, I think that in my case (age 67), retirement and use of the VC account for its intended purpose — to purchase additional annuity — is a very good deal, which according to my calculations would yield 8.46 percent for life (which includes a 10 percent reduction for my spouse survivor’s annuity, who is 65). Compare that rate to a…
Q: I recently read an article by Mike Miles regarding rebalancing the distribution of funds in your TSP. I’m currently in the L Fund 2020. With being in the L Fund, do I need to consider rebalancing my distributions or is this done automatically for me just by being in this type of fund? A: The L Funds are automatically rebalanced daily to an ever-changing allocation. That is not the same as rebalancing your account regularly to an allocation selected to best meet your needs. I suggest you research the L Funds, and anything else in which your life savings…
Q: Before joining the government civilian workforce, I worked as a government contractor and contributed to the company’s retirement plan. When I left the company as a contractor and joined the government, I had to take my retirement fund and roll it over into another investment firm. At that time I put the money into a Franklin Templeton FTB and T Rollover IRA account. It has now been 10 years and the initial investment has only increased by 30 percent. First, can I re-roll that money into my TSP account (which I believe I can), and secondly can it be used…
Now might be a good time to rebalance the distribution of funds in your Thrift Savings Plan account. This is a good idea if it has been at least six months, but particularly if it has been more than a year, since you last rebalanced your account. If you read my column regularly, you know that I generally recommend that TSP participants find the asset allocation, or distribution of funds, that safely supports their retirement plan with a minimum of risk, and then regularly rebalance their accounts to this allocation. In most cases, this allocation will include all five TSP…
Q: The main — and probably only — reason I need to transfer my money from TSP to a regular IRA is that I’ll be able to make withdrawals as I wish or as needed. You always advise your readers to consult someone trustworthy to advise us before we do this. My question is, how do we determine who’s trustworthy? I’ve been approached by my bank, credit union, some investment companies, etc., but I just don’t know what questions to ask or what to look for, other than their fees. A: Unfortunately, it’s not easy. But, you can start by…
Q: If the government defaults on their debt on Aug. 2, what would happen to the G Fund? Which TSP fund would be the safest? A: Under the current law, any failure to fund the G Fund as specified must eventually be made up. The principal and returns are guaranteed by the federal government, which remains the best guarantee you’ll find. The G Fund is still the most secure of the five funds.
Q: Each year when my husband receives his minimum distribution from his TSP, the documentation shows a breakdown of where the monies are coming from. Within each fund there is a breakdown of deferred compensation, savings, rollover, DEC/IRA and employer match. So each year some of the minimum distribution is coming out of a regular IRA. (There was a short period of time in the 1980s when money within the Thrift Plan could be assigned to an IRA. I seem to remember it did not last for very long.) Can that portion of the minimum distribution that was originally in…