What is the one thing federal employees need most when it comes to retirement planning? A fully inflation-indexed immediate life annuity. The one missing piece of the retirement puzzle for federal workers is the option to use their Thrift Savings Plan balances to create a stream of income that is guaranteed to last a lifetime and to maintain its purchasing power over the years. Yes, you do have the option to purchase a TSP annuity, but it has what may, for many, be a fatal flaw: It doesn’t guarantee that the payments will keep pace with inflation. Planning for retirees…
Browsing: thrift savings plan
Q: I am 69 and a federal retiree who will need to begin annual withdrawals from my Thrift Savings Account next year when I turn 70 1/2. My financial advisor told me that I could put the minimum annual withdrawals from my TSA into a regular IRA and avoid paying the tax until I take the money out of my IRA. Is this correct information? If this is not correct, is there any other way to avoid paying the tax on withdrawals from my TSA at the time of withdrawal? A: Not correct. Maybe you should find another financial advisor.…
Q. Is there a difference for reported income from a Thrift Savings Plan withdrawal versus a TSP annuity payment? In your Q&A, the TSP withdrawal is said to be reported as income while the TSP annuity is not reported as income. Why? A. Distributions from your TSP account and payments from a TSP annuity are both considered taxable income.
Q. I am in the process of transferring my IRA account from my bank to my Thrift Savings Plan account. The majority of my IRA is from old 401k rollovers from previous jobs (pretax). However, there were a few years when I made contributions to my IRA with after-tax money through my broker. I’ve had my IRA for years now and have no idea how much or what portion of it is after-tax money as my broker has made many trades over the years. How can I determine exactly how much of my IRA is pr-tax and how much is…
Q. Can I cash in U.S. Savings Bonds and use the money to add to my TSP annuity through Met Life? A. No
Q: I’m a Federal Employees Retirement System retiree, 70 1/2 years old, and have been receiving fixed monthly payments from my Thrift Savings Plan account to cover my living expenses since my retirement in 2006. I will begin required minimum distributions this year and would like to know if the IRS will allow the amount of my annual TSP withdrawals that exceed my TSP yearly RMD to be credited against the RMD requirements due to start this year for the standard individual retirement accounts I hold from credit unions, banks, etc. A: Your RMD must be calculated separately for each…
Q: Does a federal employee who is fired get to retain Federal Employees Retirement System defined benefit plan annuity and government contributions to his Thrift Savings Plan? A: You are always fully vested in your contributions and the government’s matching contributions. The automatic 1 percent agency contribution under FERS vests after you have completed three years of federal civilian service (two years for congressional and certain other noncareer positions).
Q: If Congress is slow to approve a raise in the debt ceiling and the government decides to furlough employees in order to pay other loans, what are my options to use Thrift Savings Plan funds to put food on the table? Can I only make early withdrawals that are subject to penalty and tax, or can I get a hardship loan with delayed repayment when my checks start again? A: Unless an exception is offered, you should assume that you will still be considered “in-service” during the period and will be subject to the in-service withdrawal limitations. This means…
Q: I am a 52-year-old law enforcement officer, 6(c) designation, and retired under the Federal Employees Retirement System this past year. Although I thought I had a good handle on this from your website, I am confused by a retirement guide an LEO put out indicating the following: “If you continue your agency employment at least one day into the calendar year of your 55th birthday, you may make unabated penalty-free withdrawals from your TSP account upon retirement. You cannot roll over your TSP and make penalty-free withdrawals at 55.” The first part indicates than an LEO must work until…
Q: In a recent response, you recommended a reader not take out an annuity using Thrift Savings Plan funds. Do you consider these annuities unsafe? I am thinking of taking an annuity when I retire to guarantee an income (along with my regular annuity and Social Security). I’m not sure that I would get enough through taking a set amount each month, or that it would last for the rest of my life. What do you see as the problems with the MetLife annuity? Are there fees for administering the account? A: Because it is an irreversible action, I generally…