Q. I have read many of the articles and TSP literature and I am still a bit confused. As a federal law enforcement officer over age 55, I plan to retire later this year. I have read that if I want to take withdrawals from my TSP account prior to age 59 ½, I can do so without having to pay the 10 percent IRS penalty for early withdrawal, so long as I do it in an annuity (not interested) or, based on life expectancy (not interested as it provides more funds than I want at the beginning of my…
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 retired (2008) and still maintaining my TSP fund. I don’t plan to dip into it for at least 5+ years. I am now 67 years of age (68 in July), and would like your opinion on the feasibility of moving my entire TSP holdings into the L 2020 Fund. Also, should I take that step, what are the penalties for withdrawal before 2020? A. It is possible for you to move your money into the L 2020 Fund and there are no penalties for withdrawals from the fund.
Q. On the TSP calculator “How Much Will My Savings Grow?” there is a field asking me to “Enter the number of years that you expect to keep your money in the TSP” I am trying to figure out how to answer this field. If at age 56 I choose the annuity or TSP monthly payment option, a large portion of my dollars will remain in the account. Only the monthly payments will be deducted. So, would I tell the calculator that the number of years my money will remain in the TSP would the number of years I am…
Earlier this year, many annuitants were surprised to see the size of their monthly retirement checks shrink. This happened because the formula used to calculate withholding was changed because of changes in the tax law. The change in law was not an under-the-table tax increase. Instead, the Dec. 31 expiration of the Recovery Act’s Making Work Pay tax credit caused the Internal Revenue Service to adjust the 2011 tax withholding tables — which increased the amount withheld. However, the change does not likely affect the taxes owed by an annuitant. The increased withholding rate does not necessarily correspond to an…
Q. I am a FERS employee with the Postal Service. I am 60 years old with 26 years employment. If I decided to retire this year, can I then withdraw monthly allotments from my TSP until I am 62 and then stop and roll it over into an investment plan? A. Yes, but it’s hard to imagine a better investment plan than the TSP.
Q. Do you know when the TSP will offer a Roth IRA? As someone over 50 years of age, I am able to contribute $22,000 annually to the TSP. Will I be able to contribute $6,000 annually to a Roth IRA, in addition to continuing to contribute the $22,000 to my TSP? A. The TSP will not be offering a Roth IRA. It is scheduled to offer a Roth account option in 2012, although the official rollout date has not been announced. The contribution limit will likely apply to whatever contributions you make to the TSP, combined. You may already…
Q. I believe one of your previous columns indicated that the management fee of the TSP is far less than private sector investment firms. Could you provide scenarios comparing TSP vs. other well-known funds: Please include USAA on the list. For planning purposes, assume $200,000 in the account. A. There are thousands of funds out there, so I’m not about to spend hours doing your homework for you. I will give you an example, however. According to the TSP’s website, in 2010, the TSP’s funds cost their investors 0.025 percent to operate. So if you invest your TSP assets in…
Q. Will the Thrift Savings Plan’s Roth 401(k) feature allow for a precious metals IRA option? A. Don’t count on it.
Q. My TSP question is based on an earlier answer you gave someone else: “A life annuity means that payments continue, on an accrual basis, until the annuitant’s death, unless a survivor benefit option is elected at the time of purchase.” When I die, are the funds remaining in my TSP inheritable by my adult child? If not, why should I leave it in the TSP not knowing when I will die? If yes, can the funds remaining in my TSP be rolled into an IRA or TSP that my adult child owns? A. If you use the funds in…
Q. I have been retired from the Postal Service for about 10 years. I made a poor choice when I withdrew all my funds from the TSP. I have about $13,000 of it left in an IRA that is only earning about 1 percent. Is there a similar savings plan that one can invest in, in the private sector. That is a plan that has the various investment options, without the equal employer investment? A. Yes; an IRA at a discount broker using index funds similar to those available in the TSP. Simply transfer the assets from your current IRA…