Q. I am retired and turn 70 this month. Even though I do not want to begin distribution of my Thrift Savings Plan investment, I understand that by law I must select a required minimum distribution program. My dependent spouse is 76 and also retired. I am healthy and, with my family genetics, could expect to live to age 100. I do not need the TSP to live on and want to maintain it in the TSP investment form for as long as possible. Under these circumstances, what is the best RMD to select: a life annuity or a TSP monthly payment? Should it be…
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Q. Has there been any analysis over the cost/benefit of drawing Social Security at age 62, banking the money in a conservative investment instrument such as T-bills and drawing down on it at age 70 along with the reduced SSA amount using a 20-year amortization rate? A. There has been much analysis done on the timing of claiming Social Security benefit. I analyze the options for every one of my clients who haven’t already made the choice. You didn’t ask, but I’ll assure you that there is no universal result to this analysis. What will work best for you depends…
Q. I am 58½ and a federal employee. Can I take all or part of my Thrift Savings Plan and move it to a self-directed IRA? Or do I have to wait until I am 59½? How much tax will I have to pay on this? A. You may not take an in-service withdrawal for rollover to an IRA until you reach age 59½.
Q. I have a variable annuity (mutual fund) with Western Reserve Life Assurance and it has been doing terribly for many years. I put $10,000 in it in 2001, and it’s only valued at $14, 500 now, 12 years later! My Thrift Savings Plan account is doing much better, and I would love to transfer or roll over this money into my TSP account. Can it be done, should I, and, if so, how? A. It may only be done if: 1. The annuity is an IRA or other Qualified Retirement Account; and 2. All of the money it contains…
Q. I retired in 2011 and must start required minimum distributions soon. I understand taxation if the Thrift Savings Plan sends me fixed dollar payments or if TSP pays out based on life expectancy. But what if I have TSP buy an annuity with part of my TSP and I leave the balance in the TSP? How are taxes figured? A. Your annuity income will be taxable as ordinary income and you will be required to take RMD from the remaining TSP balance, which will also be taxed as ordinary income.
Q. Has the maximum contribution allowed for Thrift Savings Plan election and catch-up changed from 2013 to 2014? A. Not yet.
Think you can accurately predict the future? It seems that many Thrift Savings Plan investors do. TSP-related message boards and online forums are filled with posts from participants who are obsessed with trying to position their accounts to either take advantage of, or defend against, this or that anticipated turn of events. In some cases, this is smart; in others, it’s not. In the case of rising interest rates, for example, the current environment makes higher future rates all but certain. This unusually high probability, along with the availability of an attractive substitute for bonds in this environment, make substituting…
Q. I will turn 70½ next year and understand I need to take withdrawals from my retirement accounts. Can I add all of my accounts together — IRA and Thrift Savings Plan — compute the required minimum distribution, and then withdraw from one account which is not doing as well as the others, as I can if I have only IRAs? I want to withdraw my entire minimum from one IRA. Or must I take a minimum withdrawal from my TSP separately from my IRAs? A. You must compute the required minimum distribution for each account separately, but you may…
Q. I am planning to retire at 65½ years of age. Can I withdraw monthly a certain amount between 65½ and 69½ and change to the life expectancy option at 70? A. This is not allowed, but if you reduce your fixed monthly withdrawal to an amount that does not meet your required minimum distribution for the year, the Thrift Savings Plan will issue a payment to make up the difference and ensure that your RMD for the year is met.
Q. I’m separated from federal service due to disability. I’m waiting on a federal disability decision. In 2011, I took money out of my Thrift Savings Plan while still employed due to a decline in pay stemming from my disability, and I knew I would be going out under disability. In 2012, I again took a withdrawal because I did not have any income, was waiting on a decision, and was told that the next withdrawal would deplete the account. Unfortunately, I had to take the last withdrawal this week due to lack of income and no decision on the…