Q. I am a civilian federal employee with 24+ years in FERS. Is there information as to whether or not there will be a reduction in force for the Defense Department in the next six to 12 months? I am considering retirement but would like to qualify for a buyout if it becomes available. What options are there for my Thrift Savings Plan at retirement? I’d like to roll over into more than one IRA, at separate financial institutions, if possible. How long does it take to process retirement paperwork? I also need to apply for Social Security benefits. A. Mike:…
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Q. If I withdraw my Thrift Savings Plan earlier than age 59, I will be penalized 20 percent at the time of withdrawal and have to pay 10 percent in taxes at the end of the year. What if I transfer the money into a traditional IRA and withdraw it a year later? Will I save on taxes? A. Your premise is incorrect. Rolling over the money to an IRA doesn’t help you avoid taxes or penalties on your withdrawals. It may work against you, depending upon when you retire.
Q. Why would you recommended keeping money in TSP, when, with the possible exception of the G Fund, you can replicate the S, I and C via the use of low-cost exchange-traded funds. The IRA provides much more flexibility regarding withdrawal of funds and many more investment choices — stocks, ETFs, MLPs, real estate investment trusts, to name a few. A. To reap the benefits of the strategic use of the G Fund and the much lower costs. I know the benefit of these. You haven’t specified the benefit of the securities you mention. There may be times when you must…
Q. I turned 70 years old in July and have been a CSRS retiree since 1997. I started the required minimum distributions in September 2012 from the Thrift Savings Plan and an IRA with DWS Scudder. Monies were invested in the G Fund with TSP and the DWS GNMA S Fund, which are very low risk. Before retirement, I felt more comfortable taking risk. I started withdrawing RMD only because I had to avoid penalty. My main concern at this stage in my life is to face as little risk as possible and to at least maintain my balance with minimum losses. My IRA…
Q. I have power of attorney for my military retired son who is not employed and only receiving retirement benefits, as well as undergoing a divorce. There is just not enough money to go around. I am paying what I can with his funds, but there is one large debt that there is no way to make payments on (they’ve refused what little is available) since he is only getting half of his retirement income due to the pending divorce. He has an IRA and a Thrift Savings Plan account. Would the creditor be able to take the TSP monies?…
Q. I understand why you defend leaving your money in the Thrift Savings Plan because of low expenses, security, protection from lawsuits, etc. However, how do you address the issue of “locking in losses” when withdrawing money in retirement from the TSP? For example, in an IRA, I can have (for a basic portfolio) a cash fund, an income fund and an equities fund. I know I can do this in the TSP, as well, G/F/C or S, but the primary difference is when I go to withdraw my money, in the TSP it comes out of all of these…
Q. I have a Thrift Savings Plan account as a CSRS retiree. I also turned 70½ this year and have non-Roth IRAs. Can I take a distribution from one of the IRAs that will satisfy the required minimum distribution calculation for my TSP account and all non-Roth IRAs? If so, would I still have to take a distribution from my TSP account just because I turned 70½? A. According to the Internal Revenue Service rules, you should be able to satisfy your entire RMD requirement using one or more withdrawals from any covered account or accounts. The TSP will automatically distribute its…
Q. When does a nonfederal retirement fund (401(k), IRA, Substantially Equal Periodic Payment, etc.) qualify to be rolled over to the Thrift Savings Plan? Is there a time limit that such funds need to remain before transferring to a TSP account? A. Basically, the funds need to come from a tax-deferred retirement account and consist of only yet-to-be-taxed money.
Q. My wife is retired under FERS with a Thrift Savings Plan account and I, too, will retire at some point under FERS with a TSP account. Both of us have individual IRAs. Can each of us consolidate the IRAs into our own TSP accounts? A. Yes, as long as they don’t contain money that is eligible to be withdrawn without being taxed (tax basis).
Q. I worked for the Department of Justice from 1989 to 2003 under FERS. I have worked in the private sector since that time. I will be 62 in 2015, at which time I think I qualify for a retirement annuity. Can I do all of the following: 1. Receive a FERS annuity based on my high-3 salary; 2. Continue to be employed in the private sector; and 3. Leave my Thrift Savings Plan money where it is for now. Is there any reason not to do this, or any value in deferring this? My impression is that the annuity…