Q: Should I entertain the idea of purchasing a TSP annuity? Since I have been in the system, the annuity interest-rate index has tanked from well more than 4 percent to today’s rate of 2.875 percent. To me this means I would have made more per month a few years ago retiring when I had $300,000 than I can now with $560,000! Wow, big mistake. Can you advise if 1) the AIRI will bounce back? Or 2) what is my alternative if I should decide to pull the plug next July? A: You should always be willing to consider the…
Q: I plan to retire March 1. I am thinking about maximizing my TSP and TSP catch-up contributions for the first two months of 2012. That would be a total contribution of $16,500 and $5,500 respectively. I know this would have huge tax advantages for 2012 and increase my retirement investments, so is this a good plan? Upon retirement, I will have 720+ hours of annual leave and do not want to have a huge salary increase for the tax year, and this is one way to accomplish this. Am I overlooking something? A: “Is this a good plan?” is…
Q: I know I can receive a monthly payment once I retire, I can take all my money out when I retire, and I can leave my money in TSP until I am 70 1/2. Someone told me that there are some restrictions about taking my money out. I am 58 and have 35 years service so when I retire I intend to keep my money in TSP. I know that when I am 70 ½ I have to start taking money out. I want to know if, say five years down the road, I decid I want to take…
Q: I am 69 and a federal retiree who will need to begin annual withdrawals from my Thrift Savings Account next year when I turn 70 1/2. My financial advisor told me that I could put the minimum annual withdrawals from my TSA into a regular IRA and avoid paying the tax until I take the money out of my IRA. Is this correct information? If this is not correct, is there any other way to avoid paying the tax on withdrawals from my TSA at the time of withdrawal? A: Not correct. Maybe you should find another financial advisor.…
Q. It is my understanding that it takes 31 days after retirement date (this Nov. 30) for your TSP to be processed. What happens if, due to the process time, you don’t have time to meet the 60-day rollover? It is also my understanding that after age 55 up to 70 1/2, you can take out any amount you need as long as you pay the tax owed. However, once you start taking, will this be used to meet the RMI for all your total IRA no matter which one you take from. A. The 60-day rollover window starts from…
Q. Everyone I work with seems to hold the same opinion, that after retirement all TSP monies should be left in the G fund throughout retirement. Is this a pretty standard opinion everywhere, or just where I work? A. I can’t tell you what everyone else thinks, but I can tell you that I’ve never had a single client that was willing to proceed with a plan that included a an allocation of more than 50 percent of their entire investment portfolio in the G fund. They either can’t afford to live with such a constraint, or they were rich…
Q. If I opt to take a monthly withdrawal from my TSP pension, can I take a lump sum any time after that if I change my mind? A. Yes, if it is full and final withdrawal.
Q. I read a question regarding TSP. You stated that if the TSP is used for purchasing a home, the money would be taxed. In other words, they are telling you how to spend your hard-earned money. I would like to think that I could spend my money any way I desired. Please tell me if there are restrictions on how to spend my money? A. All money that is withdrawn from the the TSP is taxed as ordinary income.
Q. It is my understanding that if you retired in the year you turned 55, you never pay 10 percent penalty on Thrift Savings Plan withdrawal, correct? A. Correct.
Q. I cannot find the origin of the law, rule or whatever the decision process was to subject monies withdrawn from 401(k) and retirement funds to the 10 percent penalty if one has not reached 59½ years of age. Was this legislated? Was it an Internal Revenue Service decision? How did it come about? A. This question falls outside the scope of this forum. You should pose it to a legal historian.