Q. I am a 61-year-old CSRS retiree. I have approximately $120,000 in the TSP. I do not plan on touching the money but leaving it as an inheritance to my children. Recently, however, with housing prices being low, I have thought about cashing it out and buying a second home in Florida ,which of course the children would also inherit. This would give me a second home with no mortgage. Would the tax on the withdrawal make this a foolish move? A. It’s not foolish to use your money to live your life the way you want. The taxes will…
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As a retirement investment adviser, I find the Thrift Savings Plan’s five basic funds to be the best examples of their kinds anywhere: • The C Fund is invested in the diversified group of stocks included in the Standard & Poor’s 500 Index and represents a diversified investment in the stock of large U.S. companies. • The S Fund provides investors with exposure to the performance of medium and small U.S. company stock. • The I Fund invests in the stock of companies in Europe, Asia and the Far East, the most developed foreign markets. • The G Fund is…
Q: In answering a previous question about maximum nondeductible contributions to Individual Retirement Accounts, you wrote: “Your participation in the Thrift Savings Plan should not prohibit you from making the maximum nondeductible contributions to a traditional IRA in 2009.” Is the answer the same if I have a Roth IRA instead of a traditional IRA? Can I max out both TSP at $22,000 and ROTH IRA at $6,000? A: The rules are different for Roth IRA contributions. You’ll have to use an online calculator or the rules contained in IRS Publication 590 to see if you can contribute to both.
Q: I just read the “lost decade” article in Money Matters and I am wondering why you did not mention the L Funds. I have all my Thrift Savings Plan funds allocated to L Funds as recommended to me since I am in my 10-year window of retirement. Is that a mistake? Should I also diversify into the other five individual funds? A: I’m not a fan of the L Funds, but I can’t say that using them is a mistake. The problem I have with them is that it’s difficult to know whether the robotic allocation shifts they make are…
Q: What happens with Federal Employees Retirement System unused sick leave and annual leave at retirement? I will have 2,080 hours at retirement and would like to cash that time in toward my Thrift Savings Plan. A: Based on the current regulations, the potential candidate for this maneuver would be unused annual leave, which must be taken in cash at retirement. Nothing definitive has happened on this yet, but it is under consideration.
Q: In 2006, my financial adviser convinced me to take a one-time within-service Thrift Savings Plan withdrawal and roll it into an Individual Retirement Account for purposes of stretching the IRA withdrawals. My money was invested in a variety of funds within the American Funds group (all front-end loaded). Of course, my funds were decimated in 2007 and 2008, and I have yet to recover. Can I roll my IRA funds back into the TSP after having exercised the withdrawal? I am trying to rectify what I have come to believe was a serious error in judgment. I am 65…
Q: I retired three years ago at age 56 with 33 years of civilian service in the Civil Service Retirement System. I elected to take my Thrift Savings Plan contributions and roll them over to a qualified program. I began drawing off my investment in the fall of 2008. After talking to our tax adviser this year, I learned that I was penalized for early withdrawal in 2008 and will be again in 2009 because I will not be 59 1/2 until June of this year. After attending a retirement seminar several years ago, I was informed that because I was…
Q: I’m retirement eligible and in the Federal Employees Retirement System. I’m 60 years old and, after having paid for my military years, I’m two months away from 40 years of service. Does my Thrift Savings Plan account continue to draw interest as I receive my annuities? A: Your TSP account continues to produce the returns that accrue to the funds in which it is invested.
Q: I had to retire from federal service because of medical reasons, and I was granted the medical retirement in 2009. I had to withdraw all my TSP funds in order to survive. I was 57 years old and I had 20 years of time, however, I did buy back three years so it should have been considered 23 years of federal service employment. Can someone tell me what to expect with my 2009 income taxes, such as penalties and taxes? A: Your federal service record has no impact on the taxation or penalties imposed on TSP withdrawals. The money you have withdrawn…
Q. Starting about October 2008, I’ve read and heard opinionators state that based on the country’s poor economic situation and long-term market performance, e.g., the performance of the S&P 500 index over the past 10 years, that strategies, such as “buy and hold” low-cost, tax-advantaged, index funds such as TSP’s C, F, S, and I funds, “dollar-cost averaging,” and invest for the “long term”, are no longer valid ways to invest and save for one’s future retirement. Could you share your opinion on the whether we’re in a “new paradigm” (and what is it?) and whether the “average, unsophisticated investor”…