TSP rollover

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Q. I have recently retired from the government at age 62. My TSP took a hit in 2014. I had to take a loan in 2014 and will not be paying it back. It’s about $20,000, and I’m aware that I’ll have to pay taxes on this (I believe 20%, but I may be wrong). Due to unforeseen tragedies and life circumstances, I am in dire straits financially.

I left federal service because there was no possibility for advancement or earning more income there. The income I get from my retirement annuity combined with my Social Security annuity equals more than what I was bringing home from my federal paycheck after deductions. I now have new employment and am able to earn the money I’m allowed to earn, adding quite a bit more income than I had.

I’m sending this inquiry just to confirm my assumptions about my situation. There is nothing I can do about the loan. I will not be able to pay it back. I will have to take the tax for the withdrawal. I will no longer be able to contribute to my TSP. I believe my only option is to roll-over what is left, because my financial resources are exhausted, and I may need to get to it in a financial emergency. This is not possible with the TSP. Therefore, I must roll it over if I perhaps need to get to it? I’m hoping that I may be able to contribute in time, as I begin to rebuild my assets, but this will not happen for a while.

Considering that the best thing to do is a rollover, I am overwhelmed by the information and choices available. Are you able to guide me on this? I don’t have a clue where to put this money — what company, etc.? If you can’t give me recommendations or advice on where and what will happen when I visit a financial company to do this, can you suggest an informative website or reference to help me understand all the different aspects of this process?

A. I suggest that you put it in a bank savings account, money market fund or a CD. If interest rates rise, you might want to consider using some or all of your money to buy a fixed immediate annuity from a large, stable insurance company.

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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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