One of the main obstacles to effective retirement planning is the process of estimating retirement spending. Here is the approach that I use with my clients, consistent with my philosophy to start with the easiest method and move to more difficult, intensive methods only if the previous method doesn’t provide the needed answer. It’s usually safe to assume that, while you’re working and saving, your income is going to one of four destinations: You are saving it, spending it, losing it to taxes or giving it away. If you take your gross income, subtract your pretax savings, then subtract your…
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Q: When rebalancing my portfolio to meet asset allocation targets, should I consider retirement accounts separately from currently taxable investments, or lump them together for an overall asset allocation? I am about 12 years from retirement. A: It’s most efficient to rebalance your entire portfolio, as a whole, while positioning assets in the account where they best fit. This approach can be difficult, however, and it may be more practical for you to rebalance each account on its own. There is no “right” answer for your question. The rebalancing approach selected depends upon the methods preferred by the person responsible…
Q: I am 57 years old. I retired from civil service on Dec. 31, 2010. I have not taken anything out of my TSP account. I would like to withdraw a partial payment from my TSP account and then set up monthly payments. Will I have to pay the 10 percent penalty, on the partial payment, since I am now 57 years old and have been retired for almost six months? A: Since you retired during or after the year in which you reached age 55, you will not be subject to the 10 percent early withdrawal penalty.
Q: My wife is 59 years old and retired from the California State education system because of medical issues. While she receives her retirement annuity, she kept and did not withdraw any of her pre-tax retirement funds. I am 64 years old and plan to leave my TSP when I retire this year, or next year at age 65. Will I be able to roll over or combine my wife’s pre-tax retirement fund with my TSP when I retire? And, if I could do this, is there any advantage? A: No, this is not permitted.
Q: Can I continue to contribute to my TSP after I retire? A: Only by transferring eligible IRA or other pre-tax retirement plan balances into your account.
Q: Upon FERS retirement can I roll all my TSP into a hybrid annuity with an 8 percent floor? A: Yes.
Q: I am retiring in July at age 56.6. Do I have to wait until after the day of my retirement to transfer any IRA money to my TSP? Do I only have 30 days from retirement to make that transfer? Can I start withdrawing that money from my TSP immediately, or do I have to wait until age 59.5, since it’s IRA money? Or do all resrictions end once it’s transferred to TSP? A: You may transfer eligible money into the TSP at any time – before or after your retirement. Once the money is transferred into the TSP,…
Q. I am 49 and a postal employee under FERS with 24 1/2 years of service. My job has been abolished and the whole RIF process ends on Sept. 9 of this year. I turn 50 before that date so I could possibly qualify for a Discontinued Service retirement or involuntary separation. If I retire under those circumstances, is there a TSP early withdrawal penalty incurred under an involuntary retirement? Would I be eligible for the Social Security supplement as well? A. You would only be eligible for the special retirement supplement when you reach your minimum retirement age, which…
Q. I am a FERS employee retiring on Jan. 12, 2013. Since 2012 has 27 pay periods, does a contribution to my TSP for the pay period ending Jan. 12, 2013 count as a contribution to the 2012 calendar year or the 2013 calendar year? A. Since at least part of the contribution was based on earnings for 2013 and the pay and payment will be processed in 2013, it should count toward the 2013 limit, but you’ll need to check with your payroll office to be sure.
Q: If an employee has a TSP loan and decides to retire prior to the loan being paid off, can the person still select a payment option out to the TSP even though there is an amount owing to the TSP? And, if the person already took a one-time withdrawal, so that is not an option, does the loan have to be paid off before a TSP payout can be made? A: Yes, you may request a post-retirement TSP withdrawal if you have an outstanding loan. The loan will be declared part of your taxable distribution for the year.