Q. You wrote, “the presence of the G Fund allows you to configure portfolios that produce risk/return characteristics that are superior to those available anywhere else.” I’m not aware that you could configure your own portfolio in the Thrift Savings Program, other than the index funds and L funds. Are you saying one shouldn’t own even no-load, low-fee mutual funds, more narrowly targeted than broad index funds, in an IRA? A. I was referring to configuring a portfolio using the five basic TSP funds. I know of no reason to use anything other than low-cost index funds for retirement investing.…
Q. I am 60 years old and plan on working until I’m 66. Can I take a first-time homebuyer loan from my Thrift Savings Plan as a down payment? If so, what form would I fill out? Do you happen to know how long it takes to get the money? Would I have to pay it back to the fund? Is there a penalty? I would not be taking any other payments out at this time. A. You may take a loan from your TSP, which must be repaid, or it will be declared a taxable distribution. You’ll find the…
Q. I’m 27 and contribute 5 percent of my income to the Thrift Savings Plan, which I have in the C and I funds. I’m considering opening a Roth IRA, as well as investing in an aggressive growth mutual fund. Would I be better off just increasing my TSP contributions? A. If you insist on long-shot betting — making bets that are more likely to lose than to win — you’ll have to go outside TSP. If you want an aggressive investment that maximizes your risk-adjusted expected returns, try the TSP’s S Fund.
Q. What would be the advantage or disadvantage to a retiree of transferring their TSP to a variable and/or fixed annuity? What are the issues to look for, if any? A. The main disadvantage of variable and deferred annuities is their high cost. The main disadvantage of a fixed immediate annuity, in the current environment, is a low payout rate. I don’t know a universal advantage to a variable or deferred annuity. The advantage of an immediate fixed annuity is guaranteed income for life.
Q. With regard to a Thrift Savings Plan loan, it’s my understanding that the funds borrowed are from my account (money I previously paid into my TSP account). Since I’m CSRS and the government doesn’t match any of my deposits, does the interest that I’d pay actually get paid back into my account? If not, why would I ever want to borrow my money, and then pay the interest back to some other entity? However, if the interest was paid back to my account, then I’d see no reason to not take out a loan. Furthermore, I’d see no reason to…
Q. My spouse (a federal employee) and I contribute the maximum allowed to the Thrift Savings Plan each year, regular and catch-up. Can we still contribute to a Roth TSP over and above the limit? A. Your Individual Retirement Account contributions do not affect the limits for TSP contributions. Your TSP eligibility, along with your income and other factors, may affect your IRA contribution limits, however.
Q. Are there any competent financial advisers in the Washington, D.C., metro area who are experts on rolling Thrift Savings Plan money into an Individual Retirement Account and withdrawing it under Internal Revenue Service Rule 72(t) before age 59½? A. If all you want is 72(t) support, the best option is to engage a CPA to do your taxes and have them provide you with the support. That way, they’re responsible for defending the return if it is questioned. The 72(t) rules are strict, so you shouldn’t cut corners in this area. Any good adviser who isn’t preparing your tax…
Q. I am planning on retiring Dec. 31 at age 68 with 10 years of FERS service. I will be 69 on Jan. 18, 2013. What are my options regarding my Thrift Savings Plan account? Should I roll over to my Individual Retirement Account? A. Following retirement, you may withdraw your funds from the TSP, roll them over to an IRA, or leave them in the TSP and continue to manage them. You can learn about the details at www.tsp.gov. In general, I recommend leaving your funds in the TSP as long as possible to take advantage of the unique…
Q. If I take $40,000 for 15 years from TSP, using the calculator it shows that at the end of the 15 years, I would be paying $45,000. What happens if I pay it off in a year (for example, I come into some money, sell an investment property). Do I still pay that $5,000 in unpaid interest, or is the interest re-amortized to the current date of payoff? Basically, I need some extra money for a down payment on a new primary residence. If I take the loan over the 15 years, it is a very low payment ($112…
Q. Do you happen to have any articles about the pros and cons of paying off the mortgage in retirement? We had paid off ours. But we moved to downsize before selling the bigger house. So we took on a VA mortgage at a relatively low interest rate last November. When we sell the big house, we have two options: Keep the mortgage and invest all the money, or pay off the mortgage and invest the balance. I retire in January 2013, and our pension income will be half our current income. Is there a “calculator” to evaluate the choices? A.…