Q: Once retired from the federal government, how long can you leave money in a Thrift Savings Plan account without designating how it is to be allocated? A: You can leave your money in the TSP and direct it — or not, as you see fit — until the IRS Required Minimum Distribution rules kick in.
Q: I have been separated from my spouse for six years, and he refuses to sign the paperwork for me to receive funds from my Thrift Savings Plan. What are my options? Should I just leave the money in the account? A: This is a divorce matter. You should consult an attorney.
Q: My wife and I are retiring from federal civil service effective Sept. 30 and want to continue adding money to individual retirement accounts we have had since before our civil service careers. We will not be employed after leaving the federal government. What is the contribution amount we can make to an IRA annually? A: If you have no earned income, you can’t make IRA contributions.
Q: I retired from the U.S. Postal Service on Oct. 31 and received a $10,000 incentive payment in December that was counted as part of my 2009 earned income. As part of the incentive package, I will receive another $5,000 this October. This has nothing to do with my retirement annuity, so will it again be counted as earned income for 2010? If so, I will be able to contribute it to my Roth IRA, correct? A: This is really a question for your tax preparer, but I expect that income to be reported for tax year 2010.
If you have a Thrift Savings Plan account, you’re an investment manager. If you’re counting on that TSP account to provide income for your use in retirement, you’re a particular kind of investment manager: a pension fund manager. As a pension fund manager, it’s your job to do whatever you can to coax the fund — your TSP account — into supporting the benefits you’ve promised yourself. If you are, or will ever be, entitled to a Civil Service Retirement System or Federal Employees Retirement System annuity, you probably, and rightfully, expect that the providers of that annuity make good…
Q: I am an employee under the Federal Employees Retirement System. I will retire in five years at age 56 with 37 years of federal service. I plan to continue working in the private sector and not make any Thrift Savings Plan withdrawals until I turn 62. I currently contribute 20 percent of my TSP money to each of the five funds. What is your opinion on this investment allocation? If it’s not favorable, could you provide an allocation that you feel would be in my best interest? Also, if I decide to delay my federal retirement until age 62,…
Q: I have all of my Thrift Savings Plan money in the G Fund, but I am worried about inflation. Is there any way to buy I Bonds or other inflation-indexed securities through the TSP? A: Not yet.
Q: My position was eliminated when I was 51 years old. I retired with more than 30 years of service. I would like to withdraw all of my funds from the Thrift Savings Plan; will I be required to pay the 10 percent federal penalty if money is taken out prior to age 59 1/2? A: Unless you meet one of the special exceptions to the early withdrawal penalty, you will have to pay it. For details, see the tax notice regarding distributions from your TSP account at the TSP website.
Q: My wife and I will soon need money to pay for our son’s college expenses. We would either have to refinance our home using the equity that we have built up or take a loan from my Thrift Savings Plan account. The refinance would be at 4.25 percent over 20 years with approximately $2,000 in closing costs. The TSP loan would be at 2.875 percent for anywhere from one to five years for a $50 fee. What do you feel is the best option? Is the interest on the TSP loan deductible on my taxes? A: It’s impossible to…
Q: I truly do not know what I’m doing with my Thrift Savings Plan funds. I’ve been told to divesify them; what exactly does that mean? If you were to look at this breakdown (figures rounded slightly) and know that I won’t retire for 21 years, what recommendation(s) would you make? L 2040 Lifecycle Fund: 74.72 percent of total funds, $21,423; F Fund: 5.33 percent, $1,529; G Fund: 5.28 percent, $1,515; C Fund: 4.91 percent, $1,408; I Fund: 4,88 percent, $1,400; S Fund: 4.88 percent, $1,398. A: Consider the following growth allocation: 55 percent C Fund, 26 percent S Fund,…