Q. I am active-duty military and am about to open a TSP account in January. From everything that I’ve read, I understand that I cannot transfer funds from my Roth IRA to my TSP account, but I do not understand why. I Can someone explain to me why this is the case and who made this rule? A. I can’t tell you why it’s the law, but it is the law.
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Q. I want to know what you think of two services widely advertised to federal employees. One is the Thrift Savings Plan pilot that claims to help one allocate TSP contributions in good and bad financial times with extraordinary success, and the other is a full service company offering financial and estate planning called Federal Navigator. A. I won’t review the specific services you’ve mentioned, but I will make a couple of general comments: Read the disclaimers for any advisory service you’re considering. A newsletter is for informational purposes only, so the publishers won’t take responsibility for the results their…
Q. I am a 60-year-old FERS employee and have decided to retire in March. With $250,000 in my Thrift Savings Plan, I am being courted by insurance companies to buy into their annuities. I can see some benefit but am worried that the administrative fees will take too much of my money. How can I overcome these anxieties? A. If history has taught us anything, it’s that these “financial services” companies don’t care about you and your interests. They care about profits, which always come at their customers’ expense. They’ll do and say anything they think they can get away with to confiscate your money.…
Thrift Savings Plan participants may be able to avoid the Internal Revenue Service’s 10 percent penalty for withdrawing money from their accounts before they’ve reached age 59½. That’s good news for those interested in retiring before reaching that not-so-old age. If you’re considering leaving federal employment while you’re young, you should understand your options for accessing your TSP account without triggering the early withdrawal penalty. One of the simplest ways to avoid the penalty is to use all or part of your balance to purchase a life annuity, either from the TSP’s provider or from another insurance company you choose.…
Q. I am reading TSP-775 (6-2013) concerning important tax information about TSP withdrawals. First paragraph (Deadline for withdrawing your TSP Account) states that “By April 1 of the year following the year you become age 70.5 and are separated from Federal Service, the TSP requires that you withdraw your entire account balance in a single payment.” It goes on to give options about monthly payments, life annuities. This leaves me perplexed. I thought I only needed to withdraw the required minimum distribution after becoming age 70½. Also, I thought if I have other IRAs, I could take the RMD from those and leave…
Q. I am a CSRS Postal Service employee and plan to retire at the end of 2014, when I will be 55 years old with 38 years of service (including sick leave). After reading other answers, I understand that I can immediately withdraw funds from my Thrift Savings Plan without penalty but would like advice regarding those withdrawals. Considering that TSP withdrawals are subject to regular income taxation, is it beneficial to move the funds to an IRA? Would I avoid any tax? Other than future growth potential and smaller tax rate, is there any benefit to delaying withdrawals until later in…
Q. I am 65 years old and retired from government service in March. I have about $ 400,000 in my Thrift Savings Plan account, with over $150,000 in G Fund. (For the record, I also hold about $70,000 in the F Fund, $90,000 in the C Fund, $50,000 in the S Fund and $40,000 in the I Fund.) I am considering transferring $40,000 from the G Fund to L2020 to make my TSP portfolio a bit less conservative and also as a reflection of long-term price expectations on the bond market. Do you consider this a wise move? If so,…
Q. I am 61 years old and have a Thrift Savings Plan loan of $24,000 and over $60,000 remaining in my TSP account. I applied for a Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay at my human resources office awaiting approval. What happens to my TSP loan and to my remaining balance in my account if I request a full withdrawal when my retirement is approved? Does the remaining balance of my TSP loan gets paid up from my remaining balance and incur penalty for the full withdrawal? A. If you don’t repay your loan within 90 days of the…
Q. I don’t understand what you mean by invest in the L Fund based on your life expectancy. My husband plans to retire in 2014 when he turns 62. If his life expectancy is 85 years old, does that mean he should put his money in the L2020 or L2030 Fund? He is still employed, but his Thrift Savings Plan money is in the L Income Fund. A. Recommendation to invest in the L Fund that most closely corresponds to your life expectancy (or joint life expectancy with your dependent) assumes that you don’t have the basis for a more suitable…
Q. I am 70 years old and have about $100,000 in my Thrift Savings Plan accounts. Can you guide me toward the best options to withdraw the amount? I would prefer to pay the least in taxes to Uncle Sam. A. To minimize the tax burden from required minimum distributions, you should request distributions based on your life expectancy under IRS rules. For the first distribution — the one due for the year you reach age 70½ or retire, whichever comes last) — you should consult a tax adviser to determine whether it is better to take it in that…