Life insurance. Two words that can spoil even the most perfect day. It’s confusingly complex, can be expensive and it’s all about death — very often the death of you or someone you love. While I can’t do much about the second two characteristics, I can clear up much of the confusion. The purpose of life insurance is simple: It’s there to satisfy a financial need that will accrue as the result of an early death and that will go unfulfilled by other available resources. That’s it. Three parts. Financial need, early death and unmet by other resources. If all…
Q. I’ve been putting money into the C Fund and S Fund but keep 50 percent in the G Fund. I’m not doing too well. I move it when the stock market dips and put it back when it rises. Can I put all of my money into an L Fund and get better results? If so, which one? I plan to retire in 15 years. A. Really, selling after the market drops and buying after it rises isn’t working out too well? Go figure. Identifying and applying the asset allocation scheme that meets your needs with a minimum of risk would…
Q. If you have a Thrift Savings Plan designation of beneficiary on file but you survive the maximum age to keep the money in the account and then are required to start withdrawing until the fund is depleted, what are your options to still disburse the money to the same beneficiaries? A. The beneficiary designation only applies to funds remaining in your TSP account at the time of your death, and thereafter. If you entirely deplete your account before you die, then the beneficiary designation is irrelevant.
Q. 1. I have $12,000 in student loans at about 6.5 percent interest rates. I had considered taking a loan from my Thrift Savings Plan account to pay off my balance as the interest rate I would pay back on the TSP loan is lower than my Stafford Loans. What is the maximum amount one can take out on loan from their TSP account? What is the repayment time frame demanded by TSP? 2. If I were able to pay off my Stafford loans with a TSP loan, I am not sure that would be the best decision. I am…
Q. I understand that the lump-sum payment for unused annual leave is treated as wage and salary income and is subject to federal and state (if any) income tax, FICA (Social Security) and Medicare taxes. How is it treated for Thrift Savings Plan purposes? Are individual and government matching contributions made? Can a retiring employee top up their contributions from the lump sum (up to the IRS-determined maximum)?
Q. Does the withdrawal of your Thrift Savings Plan annuity affect the amount of your special retirement supplement or Social Security if it exceeds the maximum amount of money you are allowed to make under Social Security?
Q. My former spouse retired from the military after 23 years and immediately started his FERS job. I was married when he started his new federal position, then 12 days later, he asked for a separation. Two years have passed and we just became legally divorced. Am I entitled to former spouse defined retirement plans and Thrift Savings Plan 401(k). If so, where can I locate this under CFR? A. Your share of his TSP account was determined as part of your divorce settlement or decree.
Q. I am a FERS employee with 29½ years of service. I am 54 years old. If they offer an early-out this year, could I take it without being penalized for the years before age 56? Would I be able to collect the special retirement supplement? Also, will I have a problem if I remove the money I have in my Thrift Savings Plan account? A. Mike: If you separate from service before the calendar year in which you’ll reach age 55, your TSP withdrawals may be subject to the IRS early withdrawal penalty, but otherwise, you’ll have access to…
Q. I am 41 and a “gray area retiree from the Maryland Army National Guard. I am employed with the Postal Service (FERS) and have about 19 years of service (including five years active duty, which I already paid back). I also collect 30 percent disability from the Veterans Affairs Department. In planning my final retirement living, it seems if I retire at my minimum retirement age of 57, I should be immediately eligible for full annuities of the following, with no penalties or offsets: FERS basic annuity Social Security offset (until 62) TSP annuity (no IRS penalty) VA compensation…
Q. I am a Postal Service employee under FERS. I am going to retire soon with 26½ years at age 60. Do I have to take the special retirement supplement, or can I waive it? If I take it, do I have to start taking Social Security at 62, or do I have an option to wait until I am older? If I decide to purchase an annuity with my Thrift Savings Plan balance from MetLife, is that annuity protected if MetLife folds? A. Mike: A MetLife annuity is backed by MetLife. Your state may also offer some backstop in…