Q. I retired from the U.S. Postal Service at the end of 2018 with 31 ½ years of service. I met my minimum retirement age at 56, so I believe I wouldn’t be taxed a 10 percent penalty if I withdrew from my TSP before age 59 ½. I would like to withdrawal a partial lump from my TSP. Would I be taxed for that withdrawal? A. If you receive a TSP distribution before you reach age 59 ½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10 percent of…
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Q. My husband is a retired CSRS annuitant and I’m a retired FERS annuitant. I turn 66 this year, which is my full retirement age for Social Security. I haven’t yet begun to receive SS payments or withdrawn any funds from my TSP, but would like your opinion as to leaving the TSP funds until I need to make Minimum Required Distributions. My feeling is that if I predecease him, he will not receive any of my SS, but will inherit my TSP. Our accountant thinks I should start drawing down the TSP and invest those funds, since we don’t…
Q. My financial adviser in 2014 convinced me to roll my $600,000 403(b) into an annuity. I have paid more than $48,000 in fees over the past years. I want to stop paying high fees. Do you know if it is possible to roll the annuity to my vested TSP account? A. That was a salesperson, not an adviser. The TSP will accept a direct transfer of funds if: the money is coming from an eligible retirement plan account – IRA, 401(k), 403(b), etc. – and the transferred amount contains no tax basis that you wish to claim.
Q. I started working for the federal government in 2003 and I plan to retire in 2035 or so. Until last year I had all of my TSP invested in the G Fund; however, last year I started investing 100 percent into the L 2040 fund. As of right now I have 5,292.1883 shares in the G Fund and the share price is at $16.2848. My balance is at $86,182.23 and the distribution of account is at 77.94 percent and its contribution allocation is now at 0 percent. I also have 684.1896 shares in the L 2040 Fund and the share price is at…
Q. I have designated my two daughters as beneficiaries with 50/50 split to my TSP account. One of them works for the federal government and has her own TSP account. The other daughter works in private industry. If I pass away, would they be able to inherit my TSP savings right away and roll over to their own 401(k) or IRA accounts? Would my other daughter be able to roll the payment into her own TSP account ? Do they have to pay any upfront tax when they roll over the payments to their 401(k) or IRA account? A. Your…
Q. Can I rollover a Roth TSP into a Roth IRA before age 70 ½ to avoid required minimum distributions on the Roth TSP? A. Yes.
Q. What is the annual withdrawal strategy that would allow me to avoid selling stock shares (C,S,I) during years that the market is down? I’m sure I read in “Money Matters” a strategy where a person could avoid a sequence of withdrawals disaster early in retirement by moving to the F and G Funds just prior to the annual withdrawal then back to stock shares immediately after the withdrawal. If there is such a strategy, could you explain it more specifically? A. Here’s the article I wrote for the Federal Times in 2016: How to Take a Selective Withdrawal Your…
Q. My wife and I are both long-time feds with 35-plus years and significant TSP accounts (more than $1 million). We both are inclined not to elect a survivor benefit because it seems we will have ample funds in retirement if either of us passes. Are we being short-sighted or is this a practical approach? A. Each of you, as the potential survivor, should carefully consider the worst-case scenario you might face in the various factors you can’t control, like how long each of you will live, how your investments will perform, inflation rates, spending needs, etc., before you decide…
Q. Can a deceased spouse’s TSP account be rolled into the survivors existing TSP account? A. From the brochure “Your TSP Account”: If you have an existing TSP account from your own employment with the federal government or the uniformed services, you can move your beneficiary participant account into your existing TSP account. The money that you move will be treated as an employee contribution, but it will not be subject to the Internal Revenue Code (IRC) annual elective deferral limit, which limits the amount of regular tax-deferred and Roth contributions you can make to the TSP in a calendar…
Q. Can you explain what impact (if any) your TSP savings have on your Social Security payments when you retire? Can it result in receiving a smaller check? A. Neither the size of your TSP account, nor distributions you receive from it, will affect your Social Security benefit amount.