Q. My husband is retired for seven years now and is 67 years old. So far, we haven’t needed to use this money. We are trying to keep our income below $70,000 per year to stay eligible for our state property tax freeze, which is a significant saving of $2,000 or more per year. 1. What percentage or dollar amount are we required to take out each year? 2. Did I read correctly on someone’s question that if we set up a 10-year timetable we do NOT have to pay taxes on that money? A. The required minimum distribution changes each year based…
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Q. I am 49 years old and have 24 years of service with the Bureau of Prisons. If I retire at age 51 with 26 years of service and elect a life expectancy withdrawal from my Thrift Savings Plan account, would I be able to change to a specified amount at age 55 without a 10 percent penalty, or will I have to wait until age 59½ to change my withdrawal option to avoid the 10 percent penalty? A. To meet the 72(t) exemption to the early withdrawal penalty, your series of payments cannot change until it has been completed —…
Q. After entering retirement from CSRS, are Thrift Savings Plan funds withdrawn classified as income in addition to the 20 percent accessed at the time of withdrawal from the TSP account. Are there ways to avoid double taxation if they are taxed twice other than rolling over into an IRA or Roth IRA? A. The traditional TSP funds you withdraw are classified as ordinary income on your tax return. They are not subject to double taxation. The 20 percent withheld from your payment(s) is a deposit against your tax liability. If the distribution is not a required minimum distribution and you…
Q. I’m eligible to retire CSRS Offset in a few months. I was considering a Thrift Savings Plan loan prior to retiring to pay off other bills. I understand that upon retirement/separation, I would receive a Form 1099 for taxable income. Is this something I should consider? A. If you don’t repay your outstanding loan balance within 90 days of separation from service, the amount due will be declared a taxable distribution and will be treated as though you took the money from your account on the date of the declaration. I believe that you should always consider all reasonable options when it…
Q. I am retiring in the near future and I want to take my Thrift Savings Plan balance which is approximately $175,000 to $180,000 and purchase an annuity from MetLife. My concern is if MetLife were to fold. I think my state (Massachusetts) will insure me up to $100,000 in that event. I believe that is per insurance company. So would it be wise to split that total ($175,000-$180,000) and purchase an annuity from two different companies, so as not to exceed the 100,000 limit? A. I’m not confirming your statements about the limits of protection in a particular state,…
Q. I contribute 5 percent to my Thrift Savings Plan, ensuring that I get the full matching. I would like to contribute more to my retirement and am not sure whether to increase my TSP contributions or contribute to my IRA. Aside from the low overhead of the TSP, are there any fundamental differences between contributing to either one? Are there other particular benefits to investing in the TSP or the IRA that I should take into account? A. The TSP’s low cost and the availability of the G Fund make it the best retirement investment vehicle you’ll find. Without a good reason…
Q. I have to retire in 18 months. I plan on taking a lump sum and monthly allotment from my Thrift Savings Plan at retirement. I understand both of these will be taxed at 20 percent. I am thinking of taking a TSP loan for the amount I had planned on requesting as my lump sum prior to my retirement date, with the understanding that I won’t have the time to pay it back in full and that the amount I don’t pay back will be considered disbursed income. My reasoning is that having the funds now will allow me to…
Q. I’ve been in the government for four years (retired Army) and have invested in the Thrift Savings Plan since 2009. I plan to retire from the government in 2020 with 11 years of service (I’ll be 58). My TSP portfolio is diversified but certainly heavy in the C and S funds. To avoid the losses all experienced several years ago, what are the recommended allocation moves, within funds, that one should take during what appears to be a stock market selloff that has started in August? A. Unless you plan to withdraw and spend all of your money within the next few…
Q. I took out all of my money from my Thrift Savings Plan and put it in an IRA. Now I have lost a lot of money. I retire in January. Can I have the bank put my money back in my TSP account? If so what do I need to do to make this happen? A. You should be able to do this if your TSP account is still open. If you emptied it earlier, this is no longer an option for you. You could, however, move the money to a discount broker and use Exchange Traded Index Funds…
Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits in regard to the Thrift Savings Plan and what I do with the money in the TSP (when do I have to take withdrawals, etc.)? I am a Defense Department civilian, age 53, with 35+ years of service under CSRS. A. Early retirement does not affect the rules governing access to your TSP account. The usual rules apply and they can be found at www.tsp.gov. In particular, you should understand the information contained in this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You’ll be subject to the early withdrawal penalty unless…