Q. My husband was forced to retire early when the Army depot closed here in Sacramento, Calif. Several years later, he was forced to stop working due to a stroke and applied for Social Security disability. He was told that his Social Security allotment was greatly reduced because of his Thrift Savings Plan retirement account. He never thought this was fair because he has worked and paid Social Security all his life, but instead of receiving about $1,500 a month on Social Security, he receives a reduced $450. By comparison, I retired on a state pension and am fully qualified…
Q. I turn 70½ this year and want to start Required Minimum Distribution withdrawals from the Thrift Savings Plan based on life expectancy. 1. Starting withdrawals now will not equal the total RMD amount required for the year (since withdrawals are paid monthly). Will TSP issue a “catch-up” payment before Dec. 31 to fulfill the total RMD? 2. My TSP account is allocated among all five TSP funds (based on percentages advised by financial adviser). Will TSP apportion the RMD from all of those funds and keep my designated allocation percentages? 3. TSP told me it will not withhold taxes on my RMD…
Q. I have been in FERS for 16 years. I have been in the Army Reserve for 21 and plan to stay in until after my FERS minimum retirement age (58). I have enough combat time to be eligible for early reserve retirement pay at 58. I have deployed to combat several times and receive a combat-related injury compensation from the Veterans Affairs Department. I have a FERS Thrift Savings Plan and a military member TSP. I am thinking of buying back four years of active-duty time toward my FERS retirement. I believe former President Bush signed a special combat-related compensation…
Q. When I left federal service in 2001, I rolled over my Thrift Savings Plan savings to a private investment firm. Subsequently, I returned briefly to federal service and accrued enough money in my TSP account to permit me to return funds to the TSP from a private-sector financial manager. Should I do this? I am about to turn 65. A. The TSP is best retirement investment environment you’ll find. If it were me, I’d choose the TSP over a bank or broker any day.
Q. If the lump-sum payment is considered earned income for tax purposes but is not eligible to Thrift Savings Plan deferral nor does it serve as the base for automatic agency contributions, wouldn’t it make better sense not to cash in the leave? Rather, wouldn’t it be more lucrative to continue working, take the earned vacation over the year, collect matching funds for TSP, matching funds for health insurance, and on top of that, continue to accrue more annual leave, more sick leave, and enjoy the vacation time off? I understand no supervisor/manager would approve a single vacation of 5+…
Q. I retired in 2005 with 30 years in the military. I am 58 years old. If I want to make a full withdrawal now, how much will I pay in taxes? If I wait until I’m 59½, will I pay less? A. TSP withdrawals are taxed as ordinary income. The amount of income tax you pay will depend upon your tax return for the year in which you take the withdrawal. If you withdraw the money before you reach age 59½, you will likely also have to pay the 10 percent early withdrawal penalty. You’ll avoid this penalty by…
Q. I separated from federal service in 2007 after 19 years in FERS. At the time of separation, I withdrew my Thrift Savings Plan contributions. I am considering returning to federal service. I was born in 1961. If I return to federal service, what will be my minimum retirement age? Are there special service requirements for reinstated federal employees? Am I required to return funds I withdrew from the TSP? If not required, is it still possible to return TSP funds that were withdrawn and deposited in another 401(k)? How will my FERS retirement annuity be calculated? Where can I…
Q. How is the Thrift Savings Plan’s G Fund related to bonds I keep hearing about lately being sold off from other bond funds? How is the G Fund different from these funds? Is this bond fund an inflation-protected bond fund? How does this fund guarantee the principal investment? Who takes the loss if yields on bonds purchased are lower when shares in this fund are transferred than on when those shares were bought? A. The G Fund is backed by the federal government and accrues interest equal the weighted average interest rate for all outstanding U.S. Treasury debt. It is not a…
Q. I’ve retired and have placed 100 percent of my Thrift Savings Plan account in the L2030 fund. How will my account grow if I’m not able to purchase more shares? A. The value of each share you own will change (hopefully grow) over time.
Q. Last fall, when we were approaching the fiscal cliff, I made the mistake of transferring my L2030 fund into the G Fund because I believed the market was going to have a significant drop due to the instability of the federal budget. At the time, the Dow Jones was around 14,000. Long story short, my funds are still in the G Fund and the Dow Jones has now exceeded 15,000. I don’t know when to transfer them back to the L2030 fund because I feel like I’m buying high right now. What are your thoughts? A. You’re not qualified to manage an investment…