Ask The Experts: Money Matters

By Mike Miles

Investment allocation

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Q. I am 25 and I am almost at the four-year service mark. I have been contributing since I started working for the federal government as a GS-07 at 5 percent. I am a GS-12 and started contributing 15 percent about five months ago (10 percent ROTH). My current allocation is 50 percent in C and 50 percent in S. I am trying to diversify my allocations a little better. Please help me with some feedback as to which other categories I should looking. Read the rest of this entry »

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Withdrawal fees

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Q. I want to pay off a few student loans before I retire from the military. I want to use my TSP to do so. Should I convert my TSP to a Roth IRA so I can avoid the heavy withdrawal fees?

A. There are no fees for withdrawing money from the TSP. All withdrawals from the TSP (except contributions you made from tax-free combat pay) will be subject to income taxation and, unless you qualify for one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf, any withdrawal you take before reaching age 59-1/2 will be subject to the IRS’ early withdrawal penalty. You should seek advice from a CPA before proceeding with this. You might want to consider taking a TSP loan to pay off the student loans, instead.

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Age-based withdrawal

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Q. Is a TSP age-based withdrawal, taken while an employee is still working, credited toward the required minimum distribution when the employee later retires?

A. Only if it is taken during the year subject to the RMD.

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Annuity investment

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Q. I am a retired federal employee since July 1, 2011. Because of the IRS rules regarding RDA if you’re 70-1/2 years old. I decided to withdraw an annuity of $1,500 each month. What is the best investment as to where to put my $1,500. By the way, this amount is below the 4 percent commonly used by retirees as a yardstick.

A. You should invest the money in the safest place that is highly likely to produce a sequence of periodic investment returns that will support your future financial goals. If you’re not sure what that is, I suggest that you put the money in the bank and contact me for help.

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Social Security reduction

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Q. I’ve read about the Social Security reduction if your income is above a certain amount. Does the calculation for that amount include the FERS pension and TSP annuity payments? In other words, does the Social Security Administration consider my pension and TSP payout to be “income” they will reduce against? Or is the reduction only against “wages” from actual employment income after you reach Social Security retirement age? Read the rest of this entry »

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Retirement withdrawal

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Q. I retired April 1st this year at age 72. When do I have to start taking money out of my 401k and what percentage would it be?

A. I don’t answer questions about 401k accounts in this forum, but I will answer the question as though it was posed about the TSP. Your first RMD is due by April 1, 2015. I can’t calculate the amount of the RMD from the information you’ve provided, but you can do it using the instructions contained in IRS Publication 590 or using an online calculator from a trustworthy source.

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Moving TSP funds

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Q. I plan to retire under FERS in December 2020 at age 66. All my investment is in the G Fund, $350,000, as are my allocations at 100 percent. I was advised to move 60 percent to the C fund and 40 percent to the F fund ASAP with the same allocations. I consider this a risky and aggressive move considering my situation, the economy, and that the S&P is overdue for at least a 20 percent correction by the end of this year. What do the experts advise. Read the rest of this entry »

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TSP transfer

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Q. I retired over a year ago and just started working again. Can I transfer my TSP account to my new company’s retirement savings plan without a penalty? I’m 54 and plan to work until age 65.

A. Yes, but it might be a bad idea. You’ll probably be better off keeping your TSP account and transferring your private-sector plan balance into it after you retire.

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Partial withdrawal

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Q. I want to make a one-time partial withdrawal from my TSP account. I realize this withdrawal is subject to the Virginia state and federal income taxes. Who should I contact to learn how much taxes, both federal and state, I have to pay?

A. The withholding requirements are listed in the table on Page 3 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You won’t know how much tax you’ll actually owe until you file your tax returns for the year, however.

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Early withdrawal penalty

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Q. I am a retired law enforcement officer with 25 years of service. I retired from the Bureau of Prisons in December 2009 at age 48. I am receiving my pension and the supplemental annuity. I have $300,000 in my TSP account and want to start withdrawing it. What are my options to begin receiving money from the TSP without buying an annuity and not having to pay the 10 percent early withdrawal penalty? Can I take a one-time distribution of say $100,000 without penalty? Can I withdraw the whole amount without penalty? Can I take $2,400 per month out which will last for at least 10 years or do I have to use the IRS life expectancy formula? Am I exempt from this penalty as a qualified public safety employee or special category employee? Read the rest of this entry »

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