Q: How would a protracted government shutdown impact the repayment of a general purpose TSP loan? Will I need to mail in a check to avoid a taxable distribution or will TSP wait until we’re getting paid again? I can’t imagine I’m the only one who won’t be able to make that payment while stretching a last paycheck out indefinitely. A: You will have to continue making payments unless an exception is offered.
Q: I recently retired at age 50 under the FERS/Air Traffic Controller special provisions. I would like to use my TSP funds with the full withdrawal series of monthly payments option calculated by the TSP based on the IRS Life Expectancy Table. Does this qualify with the IRS as a “substantially equal payment over your life expectancy”? Will these payments be exempt from the 10 percent IRS early withdrawal penalty? A: Yes, this distribution option will qualify for the SEPP exemption to the early withdrawal penalty. You will need to continue these payments for five years, or until you reach…
Q: I retire April 30 and plan to start monthly payment withdrawals from my TSP immediately to supplement a 31-year LEO/CSRS pension. I will withdraw no more than 5 percent in order to maintain, and maybe even grow, my balance. What TSP allocation amounts do you recommend for retirees to keep a steady flow of income? A: There is no single allocation that will magically support a steady income stream. The best method is to select the allocation that will most likely support your needs going forward, then monitor your progress and adjust the allocation when necessary to either reduce…
Q: I am CSRS with more than 30 years of service, and if I take a VERA before I reach age 55, can I withdraw money from my TSP without the 10-percent penalty? A: Unless you separate from federal service during or after the calendar year in which you reach age 55, or qualify for another exception under IRS rules, you will incur the 10-percent early withdrawal penalty. Your service time or retirement terms have no effect on the penalty.
Q: I am 63 and have been retired since 2005. I have been laid off once and let go from a fee-for-service job. When I retired, I took out $25,000. I need to be able to take out more money as I am 3 months behind on my mortgage. Getting another job takes at least three months, once hired, because of credentialing. Can I take an emergency withdrawal? Do I have any other options? I am about to lose my home. A: If you’re talking about your TSP account, since you’ve already taken a partial withdrawal, you’re only access to…
Q: What happens if your total contributions to the TSP for the year exceed the IRS limit of $16,500? A: I’m not sure how this could happen since the payroll system should cut off your payroll deferral when the annual limit is reached. I suggest you contact the ThriftLine at 877-968-3778 to discuss the situation.
Q: I am a CSRS employee and plan to retire Dec 31. I will meet the minimum age and years-of-service requirement for retirement. If I close my TSP account and withdraw all my funds prior to my retirement date, will I incur the 10 percent early withdrawal penalty? A: You’ll have to wait until you retire to close your account. If you withdraw your funds while still in service after you have reached age 59½, you will not be penalized for an early withdrawal. If you wait until you retire during the year in which you reach age 55, you…
Q: I am a CSRS employee. When I decide to retire (possibly age 55 or 56), I’m not sure what to do (if anything) with my thrift savings account. I do not plan to rely on this savings as part of my living expenses during retirement. Do you recommend keeping in the thrift plan or place it in something else? A: What you do with the money should depend upon what you expect from it. Since you have no expectations for the money, there is no appropriate investment strategy and it doesn’t matter what you do with it.
Q: I was born in 1956, serve under FERS and completed 10 years of federal service this year. Can I resign from the service and draw reduced annuity at age 56? Also, am I eligible to draw 40 percent of my TSP contribution with the remaining amount in monthly annuity immediately after resignation? A: Under those circumstances, you will be permitted to take a partial withdrawal followed by monthly withdrawals or annuity payments.
Q: What is the best resource for retirement planning for federal employees? Is there is listing of qualified fiduciaries or financial planners available for retirement planning who are not commission-driven brokers? A: I know of no such resource. My practice is Variplan, LLC, and I believe that we are the best resource you’ll find – fiduciaries, fee only, cost effective, experts. www.variplan.com.