By now, I’ll bet that most Thrift Savings Plan investors have figured out that actively trading TSP funds, either for short-term profits or to avoid short-term losses, is an unreliable way to fund their retirement standard of living. But if speculating on short-term moves in share prices is the wrong way to try to build wealth, then what is the right way? Buy and hold? There is no shortage of advocates for the proposition that simply buying quality investments and then holding them indefinitely will lead to superior investment results. I’m sorry to say it’s not that easy. For starters, the…
Q: Can I transfer my old SEP-IRA into my existing TSP account? A: Yes, as long as it contains only pre-tax money.
Q: I plan to retire from the Postal Service on Dec. 31, 2010. Any word on the suggested rolling terminal annual leave into TSP? A: Not that I’ve heard.
Q: I hope to retire when I turn 56. I have been investing in TSP since 1987, contributing the maximum amount allowed (15 percent). My question is, at age 56, can I set up and annuity with TSP requesting a small amount a month and still receive interest on the amount left in my account? A: Yes, as long as you haven’t already taken a partial withdrawal. Use a partial withdrawal to purchase the annuity and leave the rest in your account until you need it.
Q: Is it possible to set up monthly payments from your TSP and then later have TSP use part of your funds to purchase an annuity for you while continuing the monthly payments with the rest? Or must both withdrawals be set up at the same time? A: It is not possible to take a partial withdrawal for a TSP annuity while continuing monthly payments.
Q: I retired from Federal Service under FERS at the end of May of this year with 24 years of service. I also turned 70 in early May of this year. My plan had been to purchase a lifetime annuity through TSP (METLIFE) in August of this year as annuity interest rates had typically been higher in August for the past few years (2006, 2007, 2008 and 2009). Unfortunately the rates have steadily decreased since my retirement and are now down to 2.750 percent, which is equal to the low of March 2009. Obviously this was not a good time…
Q: I am a 56-year-old FERS retiree who accepted the early out incentive agreement with the Postal Service in November of 2009 and have not worked since. Would the $5,000 incentive payment I am to receive in November 2010 be eligible for a $5,000 IRA contribution for tax year 2010? A: No.
Q: In a recent response you said, “Your income will be taxed in the year in which it is constructively received.” What does that mean? If I retire on Dec. 31, 2010, and receive my last paycheck in January, which will include my lump-sum payment for terminal annual leave, isn’t that money taxed as income received in 2011? Will it not be shown as income on the W-2 for 2011, not 2010? A: It is not unusual for an employer to include income on the W-2 or 1099 for the year in which it was paid, even though the income…
Q: What are the benefits/options of waiting to retire in the year I turn 55 with my TSP funds? A: If you separate from federal service during or after the year in which you reach age 55, you will have access to your TSP funds without being subject to the early withdrawal penalty.
Q: At a recent retirement seminar I attended the speaker mentioned advantages to having a universal life policy that could be converted to a disability policy over paying for a long term care insurance policy. One of the advantages mentioned is the fact that any unused money would go to beneficiaries, whereas under a long-term policy you either use the money or it goes when you go. Why buy a long-term care policy when you can have this benefit? A: It costs more.