Q. Will it be possible to convert a normal Thrift Savings Program account to the new Roth option? I understand that the taxes due would have to be deducted, but I’m curious as to whether or not it is even possible. A. This is not allowed.
Q. My mom, who doesn’t know English, turned 70½ on Aug. 4, 2011. She has IRAs at two different places: Vanguard and Bank of America. My mom has already satisfied her 2011 Vanguard required minimum distribution before April 1, 2012, because it was her first RMD. The Vanguard 2011 RMD was calculated by Vanguard and mailed to my mom, by the way. Was she also required to take a Bank of America RMD? If so, oh no! What’s the best way to proceed? A. In general, an RMD must be calculated for each IRA, and the total RMD for all…
Q. I have about 10 percent of my TSP invested in the International Fund and about 90 percent invested in the G fund. I do not want to take payments for the International Fund because it is down so much. Can I just take payments from the G fund and wait until the International Fund recovers, or do I have to take a proportional amount form each fund? A. Any distributions will come from your investment funds proportionally. You may rebalance after the withdrawal is made, however.
Q. I am confused by your statement May 29 that the postmaster who is considering “early retirement” after 24 years would be subject to a TSP early withdrawal penalty. My understanding is that if one is 55 years of age and retires, he/she can access his/her TSP funds without a penalty. Because this person is 55½, he or she would not be subject to a penalty. The authority you cite on page 7 appears to support my understanding. Have I misread your thoughts here as written? A. You’re right. Thanks for bringing this to my attention. There was a typo in…
Q. I plan on retiring in 2014 but would like to leave my Thrift Savings Plan alone unless I need it or until I turn 59 (which would be 2015). I’m looking at around $180,000 to draw from. I think I would like to start with a small amount, say $500 a month, to see how that works until my Social Security kicks in at 66. Is there any problem adjusting the monthly amount I would want? A. You may adjust your monthly payment amount once each year, in January.
Q. I’ve been doing some estimates for retirement with the TSP calculator. I plan on leaving my money in G Fund after retirement, and for interest, I’ve been putting 3 percent. Is that a conservative enough amount? A. The calculator is unrealistic in that: 1. It assumes that a constant rate of investment return will be earned each and every year, like clockwork; 2. You can predict what this rate will be; 3. You know how long you’re going to live; 4. Inflation isn’t a factor. Each of these assumptions is absurd. I think that the calculator is, at best,…
Q. If I retire at the end of August, and had not previously taken advantage of TSP catch-up, can I max out the tax benefit by having the balance of my annual allowable TSP contribution limit, plus the full retirement catch-up amount all taken out of the last close-out check for unused annual leave and sick leave? I’m in senior-level service, so I get 50 percent of unused sick leave.) A. You may set your Thrift Savings Plan deferral amount as high as you like, within the limits of your paycheck amount. Once the annual deferral limit, including catch-up, is…
Q. I am planning on retiring in December, but I will still have outstanding balances owed on my Thrift Savings Plan loans. Will they take that remainder out of my TSP money when I withdraw it? A. If you retire with an outstanding loan balance, the unpaid balance, plus interest, will be declared a taxable distribution. This money has already been deducted from your TSP balance, so it won’t be available for withdrawal if it has not been repaid.
Q. I am leaving my career-conditional federal service for a job in private industry after just over three years. The value of the account is rather small, but I was able to vest for the match. I have not ruled out returning to the service at a later time because I am still in my early 20s. If I were to take the cash option and then subsequently wish to re-enroll in the Thrift Savings Plan in the event I become federal again, would I have to repay this amount plus any interest that would have accrued to get back in…
Q. I will be taking the early-out in July. I have been a postmaster for 24 years, and I am 55½ years old. I have plans to withdraw my Thrift Savings Plan. Will there be any penalties, and will taxes be taken out? A. There will be penalty for early withdrawal. You’ll find the tax withholding requirements on Page 3 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.