Q. I am in the process of moving my traditional IRAs into the TSP, but would like to keep some money in asset classes not available under TSP. Specifically, I have in mind current investments in emerging markets and real estate investment trust index mutual funds. Assuming that I would not need to liquidate these two classes of assets for at least five years, do you have any advice on the percentage of the total amount of post-retirement assets I should hold in each class? A. I recommend that you forgo this unnecessary concentration (it’s not diversification) and move the money into…
Q. I am retiring under FERS with 23 years of service at age 66. Can I set up with TSP to draw an amount from my account on a yearly basis? Do I have to pay taxes on the amount that I withdraw? Is there an age limit where I do not have to pay taxes on the withdrawal amount? A. You may only set up automatic distributions from your TSP on a monthly basis. Every dollar you withdraw during the year will be counted as taxable income for the year, regardless of your age.
In my May 7 column, I pointed out five investing mistakes you should avoid to optimize your retirement income. In this column, I’ll discuss five more. Excessive costs. Index funds offer a return at a low cost. This is particularly true through the Thrift Savings Plan, where the cost of participating in the market’s return has been about 1/20th of 1 percent in recent years. It is not uncommon to find investors in retail brokerage accounts paying 2 percent, or more, for the privilege of investing their money. In vehicles like variable annuities and life insurance, the costs can reach…
Q. In March 2013, at age 56, I am eligible to retire under FERS as a federal law enforcement officer with 23 plus years of service (20 as an LEO). I turn 57 on Oct. 11, so I will be forced to retire Oct. 31. Assuming I do not need the money immediately, what are my options with regard to my Thrift Savings Plan? I do not want to pay any penalty and want to pay as little in taxes as possible. It was suggested that I roll it over to an IRA so that in event that I need…
Q. I have resigned from my position with the federal government in order to attend graduate school effective in May and will have been employed for a year and 10 months. I realize I need to be employed for three years for TSP vesting requirements, and I will likely forfeit my automatic 1 percent agency contribution in May, but after grad school, I intend to return to work for the federal government. How does this work with vesting in this situation? Would I be returned the 1 percent agency contribution (plus interest?) upon working an additional year and two months…
Q. I am a FERS employee. I am interested in rolling over my outside Roth IRAs into the Thrift Savings Plan’s new Roth IRA. Can I do this? If so, how do I go about it? I am paying too much in fees for small amounts. A. Unfortunately, this is not permitted by the TSP.
Q. I have a State of Kansas deferred compensation 457(b) pretax fund from when I worked for the state. Can I roll this into the Thrift Savings Plan without tax consequences? If so, how do I go about the process? If I have to receive a check from the fund directly — not made out to me — I believe I have 60 days in which to get it into another fund. A. If it contains only pretax money, you may transfer it to the TSP. Use Form TSP-60 and follow the instructions.
Q. I will be starting monthly payments from my Thrift Savings Plan account. I’m confused as to this making your payments last for 10 years. Is this really putting me into a better tax situation? You must pay on your taxes at the end of the year. I spoke to someone at TSP, and she was explaining that it is to my benefit. If your payments last 10 years or longer, they only tax you as though you’re married with three dependents. If it’s not lasting for 10 years, they take out 20 percent every month. Isn’t this a wash…
Q. I have an outstanding Thrift Savings Plan loan, and I just turned 59. I plan to continue to work for some time. After age 59½, can I pay off this TSP loan from other personal funds, then immediately withdraw those funds from the TSP without penalty if I need them for other purposes? With no loan balance remaining, would I then be eligible to take out another TSP loan? A. You may repay the loan, take a distribution and then take another loan, but 60 days must elapse between the two loans.
Q. I plan to retire from the federal government in the near future (I will have 32 years). I wish to pay my house off ($74,000) with my Thrift Savings Plan earnings. Is this a good idea? The interest rate on my house is 5.75 percent, and I realize that 20 percent will be taxed when I decide to withdraw from TSP. Should I transfer to an outside facility? I do not wish to have a house payment when I retire. A. It’s impossible to say whether this is a good idea for you without understanding and analysis beyond the…