Q. I’m a 45-year-old reservist who has been recalled to active duty. I’m also an E-6 with more than 18 years of service. I can afford to invest my entire pay, including incentive pays, and wondered if it would be better to pay off an existing mortgage, approximately $60,000, just refinanced last month at 3.5 percent and a 15-year term? Or would it be better to max out the Roth TSP and set up another deferred account or IRA of some sort? My wife makes about $55,000 per year. A. It’s impossible to say what’s best for you without the…
Q. I wanted to know your thoughts over using a portion of my savings for a “fun” account. I am 57, retired from CSRS, debt-free with no children and a spouse who has a defined benefit pension that would cover her expenses independently. I have $120,000 in a Roth IRA; $100,000 in CDs; and $225,000 in the Thrift Savings Plan, 50 percent in F and G funds. The Roth has 50 percent in a health mutual fund, 50 percent in a financial mutual fund and earns about 6 percent annually. Why not take, say, $75,000 and put it in an account…
Q. I am 71 years old and employed by a university. My retirement account is with TIAA/CREF. My employer tells me that I am not required to take a required minimum distribution. What if I want to take it? A. Ask your plan administrator whether or not they allow in-service withdrawals.
Q. I retired from the Defense Department on Dec. 31, 2009, and received my final paycheck in 2010. I purchased a traditional IRA for 2010, and claimed an income tax deduction for that IRA. I just received notice from the Internal Revenue Service that they have disallowed the deduction stating that according to my W-2 from DoD, I was covered by an employer retirement plan in 2010. My agency payroll office tells me an amount of approximately $13 was added to my retirement account based on my final paycheck, which I received in 2010. The IRS suggested I have my agency…
I sometimes hear Thrift Savings Plan investors define their investment goal as: “I want to make a lot of money without ever losing any money.” This demonstrates a fundamental misunderstanding of investing — how it works and what it can do. In particular, this kind of thinking ignores the reality that investment risk and return are intimately connected. You can’t enjoy the latter unless you’re willing to endure the former. Failing to recognize this truth will lead you to make poor investment decisions. Poor investment decisions usually lead to poor investment results, and poor investment results often lead to poor,…
Q. I plan on retiring in the next two years. I will be 53. My money is spread out among all the funds, including the L Fund. I was advised to transfer all my money to the G Fund about a year before retiring as it’s the safe fund. Is this good advice? A. It can’t be good advice if it doesn’t rigorously consider your particular set of goals, resources and constraints. What works well for one person might produce disaster for another.
Q. Quite a few of us here in Afghanistan believe the new Roth IRA is an excellent investment. We are contributing tax-free money to receive tax-free contributions and earnings after we retire and meet withdrawal criteria. We leave Afghanistan in late February. Since we have been in a combat zone for two months, we plan to max out the Roth as much as possible. If we are able to max the Roth at $17,000, how much may we contribute to the traditional TSP/Roth TSP for the rest of the year? A. The TSP contribution limit applies to all of your TSP…
Q. In an April 2011 answer to a question about the lifecycle funds, you noted that the Thrift Savings Plan suggests choosing the L Fund that most closely matches your retirement date and putting 100 percent of your money there. You said you recommend investing in the L Fund that most closely matches your life expectancy rather than your retirement date. Why? Isn’t this going to put your money at risk when you’re older and can least afford to be risky with your money? A. This is my default recommendation, and it recognizes the fact that, in most cases, your financial…
Q. If you had $300,000, could you take $100,000 for an annuity, then keep the other $200,000 in the Thrift Savings Plan? Then, down the road could you take another $100,000 and make that an annuity, too, and keep the remaining $100,000 in the TSP? Then, can you take the rest of it and make a third annuity a few years later? A. No, since this would require multiple partial withdrawals.
Q. If I have $100,000 in my C Fund and 100,000 in the I Fund and transfer the balance to the G Fund, will the balance be $200,000 if nothing changes in the market overnight? A. Yes.