Q. I believe one of your previous columns indicated that the management fee of the TSP is far less than private sector investment firms. Could you provide scenarios comparing TSP vs. other well-known funds: Please include USAA on the list. For planning purposes, assume $200,000 in the account. A. There are thousands of funds out there, so I’m not about to spend hours doing your homework for you. I will give you an example, however. According to the TSP’s website, in 2010, the TSP’s funds cost their investors 0.025 percent to operate. So if you invest your TSP assets in…
Browsing: thrift savings plan
Q. Excellent article by Mr. Miles on reducing risk by diversification of your TSP portfolio. The missing factor though is, what is a good diversification of the five funds in regards to time until retirement or time until the money is needed? Comments would be appreciated although they are simply comments with no inherent liability. A. While shorter time horizons tend to benefit from more conservative (bond and cash heavy) allocations, there is no allocation rule of thumb that is safe for every investor. This is because allocation selection should be dependent upon cash flow and terminal value needs, as…
Q. I was divorced in 2010 and my ex-wife got my whole TSP awarded to her, almost $50,000. Can I get any tax credit on my return for this? A.I’m not sure, but I doubt it since you never paid tax on the TSP funds in the first place. You should consult a CPA for specific guidance.
Q: I am a CSRS employee. When I decide to retire (possibly age 55 or 56), I’m not sure what to do (if anything) with my thrift savings account. I do not plan to rely on this savings as part of my living expenses during retirement. Do you recommend keeping in the thrift plan or place it in something else? A: What you do with the money should depend upon what you expect from it. Since you have no expectations for the money, there is no appropriate investment strategy and it doesn’t matter what you do with it.
Q: I would like to leave my money with TSP and receive monthly payments; however, I want to receive less than the monthly interest would be and let to rest go into my account so that my principle would increase. Is this possible? How do I go about finding out what the monthly interest would be? A: You can’t.
Q: I am a federal firefighter under the Civil Service Retirement System who will be eligible to retire next year with 28 years of service at age 50. When can I start withdrawing funds from my Thrift Savings Plan without getting penalized? A: If you receive a TSP distribution before you reach age 59 1/2, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of any portion of the distribution not transferred or rolled over. The additional 10 percent tax generally does not apply to payments that are:…
Q: I am 53 years old, and I was a U.S. Postal Service employee with 20 years of service under the Federal Employees Retirement System. I took disability retirement from the USPS in March after suffering injuries in Iraq as a reservist. If I take a full withdrawal from my Thrift Savings Plan account, will I pay a penalty to TSP, and at what percentage? How much will I have to pay in taxes? Will the USPS match my TSP balance? And how long must my money stay in a TSP account before I can make a full withdrawal without…
Q: Can money in my Thrift Savings Plan account be rolled over into a Roth IRA, and if yes, what are the rules and when can it be done? A: Yes, certain TSP distributions are eligible to be transferred or rolled over to a Roth IRA. The TSP notice available here will introduce you the rules and limitations.
Q: I recently retired from the federal government. If I take my money out of the Thrift Savings Plan in a lump sum, will I have to pay Social Security and Medicare taxes? A: No.
Q: I am under the Federal Employees Retirement System and have money in the Thrift Savings Plan. I returned to government service after 16 years in the private sector (I was under the Civil Service Retirement System from 1975 to 1987 but was placed in FERS in 2004 when I returned). I have retirement accounts outside TSP, but I find TSP to be easy to manage. I have considered transferring my other 401(k) accounts into TSP, but I have also heard concerns that Congress may target TSP as a source of “revenue.” I will be considering retirement in the next…