Q. I am a CSRS 50-year-old employee who would like to withdraw $80,000 from my TSP to cover unsecured debt. Is this smart? My debt is strangling me. What is the tax hit and how can I avoid it? A. You don’t have the option to make a withdrawal unless you can demonstrate financial hardship under the TSP’s definition. If you take a Financial Hardship withdrawal, you will owe tax on the amount you take and you will be subject to the 10 percent early withdrawal penalty. You can, and should consider taking a loan, instead. Taking a loan will…
Q. I am a rehired federal annuitant. Am I eligible for a deductible IRA? A. That will depend upon your age, marital status, whether or not you or your spouse are covered by an employer-sponsored retirement plan and your income. Check IRS Publication 590, consult a tax advisor or run one of the many IRA eligibility calculators available online.
Q. I have approximately 200K in my TSP. I would like to leave the principle to my children and take a yearly withdrawal of the interest earned. What, and I know it is an estimation, would you think is a safe percentage to withdrawal yearly? A. Interest does not accrue in a TSP account. The share values change in response to changes in value. The maximum safe withdrawal rate will depend upon a number of factors including your age, health and how the money is invested and managed over time. Calculating this estimate is beyond the scope of this forum.
Q. I am a Department of the Air Force civilian and I plan to retire in June 2014. I will be 60 and have 20 years of federal civilian service. I currently have my entire TSP tied up in the 2020 L fund. Is it too early to put all of my funds into government funds for stability purposes? A. It’s not a question of timing, but of spending. You can move all of your money into the G Fund, if that’s what you mean, any time you like, but you’ll be limited to the lifestyle that can be supported…
Q. In the past, I had read that a fixed amount of money in (not making active contributions to) the G fund would grow over time based on the G fund’s rate of return. Is this correct? A. It is correct.
Q. I read your column in the Federal times regularly. I am at a loss to understand how you calculate (in percentages) the return on the individual funds. Can you share with me how you do the math? A. Since all dividends and capital gains are retained in the funds, you calculate the percentage return on a TSP fund investment by dividing the fund’s share price at the end of the measurement period by its price at the beginning of the period and multiply the result by 100.
As a Thrift Savings Plan participant responsible for managing your own pension fund, you would be wise to understand investment diversification, which means allocating your money among different investment assets — putting your eggs in many baskets. Why diversify? The usual answer — to reduce risk — is only part of the answer. The real reason to diversify is to improve — or better yet, optimize — your portfolio’s risk-adjusted expected rate of return, which is the rate of return your portfolio is most likely to produce in the future, adjusted for the risk that it will fail to produce…
Q. If I retire on Oct. 30 and receive a lump-sum payout for annual leave, can I have that directly deposited into my TSP account? A. Not under the current rules.
Q. I understand that when I turn 59 1/2, I can begin withdrawing my TSP contributions without a tax penalty. May I continue working for the federal government after age 59 1/2 while augmenting my take-home pay with something like a TSP life annuity? Right now it’s looking like I’ll never be able to retire and am looking for ways to bring more money home to live on. An extra $1,000 per month or so from a TSP life annuity in addition to my regular federal salary would really help to make ends meet. A. Yes
Q. I’m currently on active duty as a retired recall, servicing in Kuwait. I will reach age 54 in December; can I withdraw my TSP funds in January without penalties? A. From the TSP’s website: “Relief from the 10% early withdrawal penalty is availableto eligible Reservists called to duty for more than 179 days. The Reservist must have been activated after September 11, 2001 and must have received his or her TSP distribution between the date of the order or call and the close of the active duty period. The Reservist may also be eligible to repay the distribution to…