Q: I am about to retire. I still have a balance due on a loan from my TSP. Can I take the balance due as taxable distribution? I have already taken a one-time distribution after I turned 60. Or, do I have to pay it off before I can roll it into an IRA? A: Your loan balance will be automatically declared a taxable distribution if you fail to repay it after you retire.
Q: I was putting $10 per pay period into my TSP account. I increased it to $400 per pay period and my state and federal tax amount withheld went substantially lower. Is this correct and should I adjust my exemptions? A: It is probably correct since deferring your pay into the TSP reduces your taxable income for the year of the contribution. You should consult your tax preparer about the appropriate withholding rate, but if your taxable income is lower, it makes sense that your withholding should be lower.
Q: I have a question regarding a withdrawal recently made from my TSP account. I wanted to make an investment with this account and withdraw the full amount by not having the taxes withheld on the account. When I called the TSP phone number, the representative said that I could withdraw the funds and pay the taxes later on my next tax return by using a WP4 form. Being assured that it could be done, I went ahead and sent in the form to withdraw from my TSP account with the WP4 form. Without informing me first, the money was…
Q: Upon FERS retirement can I roll all my TSP into a hybrid annuity with an 8 percent floor? A: Yes.
Q: I am pretty sure I know the answer to this question, but I thought I’d ask anyway. Is there some kind of penalty for a federal retiree to leave their TSP with the government at age 65 plus? A friend of mine told me that a man who is about to retire attended a retirement seminar and was told that if you leave your TSP with the federal government at age 65 you would be assessed a penalty. I do not believe this is the case. A: Not true. In fact, you won’t find a better deal anywhere else.
Q: I am retired and have not withdrawn money from my TSP as of yet. It is my understanding that if I should die tomorrow, my spouse would inherit the full amount of my TSP. But when I looked into beginning monthly withdrawals from my TSP, it seemed to say that I had to buy an annuity with my spouse being the beneficiary of 50 percent in the event of my death. Why would my spouse not inherit the full amount? A: You don’t have to buy an annuity to initiate monthly payments from your account. Use Form TSP-70 to request automatic…
Q: It seems to me that the CSRS voluntary contributions program is the undiscovered gem of the CSRS system. I have already heard that the VC program can be used as a way to beef up a Roth IRA. However, I think that in my case (age 67), retirement and use of the VC account for its intended purpose — to purchase additional annuity — is a very good deal, which according to my calculations would yield 8.46 percent for life (which includes a 10 percent reduction for my spouse survivor’s annuity, who is 65). Compare that rate to a…
Q: I recently read an article by Mike Miles regarding rebalancing the distribution of funds in your TSP. I’m currently in the L Fund 2020. With being in the L Fund, do I need to consider rebalancing my distributions or is this done automatically for me just by being in this type of fund? A: The L Funds are automatically rebalanced daily to an ever-changing allocation. That is not the same as rebalancing your account regularly to an allocation selected to best meet your needs. I suggest you research the L Funds, and anything else in which your life savings…
Q: Before joining the government civilian workforce, I worked as a government contractor and contributed to the company’s retirement plan. When I left the company as a contractor and joined the government, I had to take my retirement fund and roll it over into another investment firm. At that time I put the money into a Franklin Templeton FTB and T Rollover IRA account. It has now been 10 years and the initial investment has only increased by 30 percent. First, can I re-roll that money into my TSP account (which I believe I can), and secondly can it be used…
Now might be a good time to rebalance the distribution of funds in your Thrift Savings Plan account. This is a good idea if it has been at least six months, but particularly if it has been more than a year, since you last rebalanced your account. If you read my column regularly, you know that I generally recommend that TSP participants find the asset allocation, or distribution of funds, that safely supports their retirement plan with a minimum of risk, and then regularly rebalance their accounts to this allocation. In most cases, this allocation will include all five TSP…