Q. I am CSRS and eligible to retire now with 30 years at age 56. My salary excludes my wife and I from funding a Roth with more than $6,000 each year (except $22,500 allowable into new Roth TSP). Let’s say I put $25,000 into the Voluntary Contributions Program with the intention of making a one-time, lump-sum withdrawal as soon as possible and roll the original $25,000 into a private Roth IRA. I am told that doing so is a way to immediately fund a Roth that is not limited to my current $6,000 amount mentioned above. Do I understand this correctly,…
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Q. I am a CSRS employee with 38 years of government service. So far, I have my funds spread over all of the funds: 45 percent in G and 30 percent in F. Is this wise considering I intend to retire in fiscal year 2013? Also, is it wise to take funds from my Thrift Savings Plan and just pay off one of my two mortgages? The mortgage rates are 4.5 percent and 5 percent. I’d like to pay off the 5 percent mortgage, which is about $150,000. Is this wise? If not, why not? A. Your asset allocation makes no sense.…
Q. My retirement time frame under FERS is about 2035. Prior to joining the feds, I had virtually no retirement planning. But when I joined the feds at age 33, I started making diligent contributions to the Thrift Savings Plan. Six years later, my TSP account has hit a $110,000 balance. This year, I started a Roth IRA with a $5,000 contribution. I am married, and our income just slid slightly below the adjusted gross income ceiling for Roth IRA contributions, mostly because I contributed $17,000 into the traditional TSP. As I look now to the Roth TSP, I am considering for the…
Q. I have a Thrift Savings Plan account, and I have a retirement annuity with a company other than MetLife from previous employment. Can the two be merged into the MetLife program, or do I have to take my TSP account to the other annuity when I retire? Am I correct in assuming that if I place my TSP either way, there will not be a tax penalty, since it will be put directly into an annuity? A. Merging the two is probably not possible. You can either continue your TSP account, use the money to buy a TSP annuity…
Q. I’m a Postal Service employee who is very close to his retirement date. I was told that withdrawing 4 percent of my Thrift Savings Plan savings per year would last for a lifetime? Is this true? What if I die two years after I begin to draw and my benefits are left for my daughter who is only 38 now? Will she receive the money for a lifetime also? Or will she be paid only the balance? A. You can’t be sure that a 4 percent annual withdrawal rate will be safe. It depends upon a number of factors, including…
Q. I just completed six years of service in the Army. I have been making contributions since I enlisted thanks to my supervisor at the time. I would like to know: what the penalty is for an early withdrawal. Also, will I be penalized for transferring it over to another retirement plan? A. The early withdrawal penalty is 10 percent of gains withdrawn, when it applies. You may roll your Thrift Savings Plan balance into an IRA or other qualified retirement plan to avoid the penalty and current taxation. Of course, you may leave your money in the TSP and…
Q. I retired from the Defense Department on Dec. 31, 2009, and received my final paycheck in 2010. I purchased a traditional IRA for 2010, and claimed an income tax deduction for that IRA. I just received notice from the Internal Revenue Service that they have disallowed the deduction stating that according to my W-2 from DoD, I was covered by an employer retirement plan in 2010. My agency payroll office tells me an amount of approximately $13 was added to my retirement account based on my final paycheck, which I received in 2010. The IRS suggested I have my agency…
Q. I plan on retiring in the next two years. I will be 53. My money is spread out among all the funds, including the L Fund. I was advised to transfer all my money to the G Fund about a year before retiring as it’s the safe fund. Is this good advice? A. It can’t be good advice if it doesn’t rigorously consider your particular set of goals, resources and constraints. What works well for one person might produce disaster for another.
Q. In an April 2011 answer to a question about the lifecycle funds, you noted that the Thrift Savings Plan suggests choosing the L Fund that most closely matches your retirement date and putting 100 percent of your money there. You said you recommend investing in the L Fund that most closely matches your life expectancy rather than your retirement date. Why? Isn’t this going to put your money at risk when you’re older and can least afford to be risky with your money? A. This is my default recommendation, and it recognizes the fact that, in most cases, your financial…
Q. I am 59 and am going to retire next year. I am in CSRS. I have a loan on my Thrift Savings Plan, which, if I retire next year, won’t be completely repaid. Do I have to repay it, since it’s my money and I can withdraw all of my money from TSP when I retire? A. No. If you don’t repay it, the outstanding balance will be declared a distribution and will be reported to you as taxable income. Since you are retiring after the year in which you reached age 55, there will be no early withdrawal…