Ask The Experts: Money Matters

By Mike Miles

TSP loan

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Q. I have worked for the Postal Service for 24 years as a postmaster. I would be able to take an early out if it was offered. I want to borrow on my TSP for a residential loan. If I make a 10-year loan from my part of the TSP next month and then the Postal Service offers an early-out retirement and I take it, will I have to continue making the payments? Also, when I do retire, will I be able to pull out all my savings in TSP?

A. If you retire, your outstanding TSP loan will become due. If you don’t repay it shortly after retiring, it will be declared a taxable distribution from your account. You may withdraw funds from the TSP any time after you separate from service.

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TSP complaint

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Q. I am a federal employee and I have a TSP account from which I am trying to take out a residential loan. So far I have faxed in my information four times and I am told every time that a different page is unreadable. The issue is I have sent each fax from a different fax machine and there is an issue every time. I would like to follow a complaint, but the thrift line is no help. How would I go about filing a formal complaint?

A. The Federal Thrift Retirement Investment Board administers the TSP. You can contact them through their website at

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Full TSP withdrawal at age 59

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Q. I left federal service and have $4,019.42 in my TSP account. I requested a
full withdrawal. Will I get the full amount less the 10 to 20 percent that is with
held for taxes?

A. Your payment will be subject to 20 percent mandatory tax withholding.

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Q. I read your article that Traditional IRA funds can be transferred to the TSP either before or after a person’s retirement. My question is, can I transfer SEP IRA funds into TSP after retirement also? How about 401K-SOLO?

A. Yes and yes.

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TSP minimum distribution

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Q. Just how is the minimum distribution calculated for the TSP? I understand calculations based on life expectancy tables, but not how the minimum amount is calculated. I am assuming that it would be less than that based on life expectancy. I am FERS and plan to retire in June.

A. In general, the Required Minimum Distribution amount is calculated by dividing the prior year’s ending account value by the appropriate life expectancy factor. There are specific rules that may apply to certain situations, however. See IRS Publication 590 for instructions for calculating the RMD.


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Transferring IRA money to TSP

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Q. I currently have about $75,000 in a money market at a local credit union — this money market used to belong to my father, but my name was on the account also. When he passed away I moved that money into my own credit union account.  May I take $50,000 out of the money market and put it into an IRA and then when I retire (in three years) move that IRA money into my TSP?

A. I’m not sure how you’ll get the money into an IRA, unless it’s already in once, since contributions are limited each year. You may transfer pretax traditional IRA money into your existing TSP account any time — before or after you retir

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TSP withdrawal

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Q. A friend of mine in the office (Federal, CSRS) recently passed away. His wife, in looking through his TSP account, discovered that he had withdrawn $70,000, but she cannot figure out where that money went because she finds no records other than the withdrawal itself.  If you have any ideas of how I might help her track it (or anyone involved in federal service TSP), or discover what happened to it, it would be extremely helpful.

A. If the TSP made the check payable to him, then the answer can only be found in his records, and not in the TSP’s. He may have cashed the check and spent or otherwise disposed of the cash, with no further paper trail. If he deposited to a bank or investment account, the statements would show the deposit. He may have used it to buy a life insurance policy or annuity contract. Again, there should be a record of this purchase. If he rolled it into an IRA, there should be a statement for this and possibly an indication in a past tax return.


Retirement and TSP

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Q. I am planning on retiring within a year, at the age of 55.  When will I be able to withdraw funds from the TPS account without a tax penalty.  My understanding is at any age once retired but I would like to make sure I am correct on this.

A. As long as you retire from federal service during or after the calendar year in which you reach age 55, your subsequent TSP withdrawals will not be subject to the early withdrawal penalty.

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TSP Monthly Payment Calculator

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Q. Why do you consider the TSP Monthly Payment Calculator useless? I have only G Fund allocations now that I am close to my FERS retirement of 34 years. I have even transferred all dollars from a traditional IRA into the TSP for ease of management and greater total G fund assets. My retirement stool has four legs: military reserve retirement, FERS, early Social Security income and TSP. The calculator allows us to put in any part of our accumulated expected TSP value that we desire for retirement supplementation and somehow calculates that against expected growth without any future contributions other than earned interest.If I chose a monthly payment that is too small, it tells me I need to plan to withdraw a higher amount. I don’t know why.It tells me, based on the calculations, that I can expect to deplete my TSP account in X number of months.From what I have read the G fund has a historical 5.76 percent annual payback. I watch it daily now and it is increasing $15+ a day. So if I assume that the annual percentage is possibly going to drop to 3 percent for the next X number of months and it is actually higher, I will have funds paying out for a longer period. So explain why you feel it is useless please.

A. Because it assumes a constant, predictable rate of return, which, as you’ve pointed out, will not actually occur. Its output is based upon a false assumption: That your account will produce exactly the rate of return you predict each and every year. Kind of like saying: “If you could flap your arms and fly 1,000 miles per hour, you could travel from Washington, D.C., to San Francisco in three hours.”


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Financial checkups: Once is not enough

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Investors, unsure about whether they are on track to meet their financial goals, frequently ask me to perform a financial “checkup.” I suspect that is the result of three influences: They are concerned about their ability to maintain their desired lifestyle for as long as they are alive; they have seen financial checkups relentlessly offered by various purveyors of financial services and products; and they lack the time or specialized knowledge to determine the answers for themselves.

Although many people are willing to pay a handsome price for this service, I rarely comply since I don’t believe the one-time financial checkup is really worth very much.

Your financial health is not that different from your personal health. When you are young and in good health, you might go years without a full physical exam, a comprehensive checkup. You tend to take your good health for granted and don’t lose sleep thinking about what could go wrong. You only worry when something does go wrong.

As you age, the likelihood of something going seriously wrong increases. If you want to maximize the probability of staying healthy and living a longer life, you realize that checkups need to come more often — at least once per year. Why? Because it is important to catch the onset of a problem early when it can be cured or managed with the greatest effect and least risk. Skipping those checkups for two or three years could mean missing a problem until it’s too late to fix, or too late to fix without considerable sacrifice.

Your financial health works the same way. When you’re young and a long way from retiring, you can afford to make mistakes. Given 20 or 30 years, you can solve most any financial problem. You save and invest without a clear picture of your goals, so when you reach the end of your career, unless you’ve made some horrendous mistakes, you probably won’t know what your lack of attention has cost your financial health. Even at this stage, however, getting a checkup at least once a year is smart but less important than it will become later.

As you get older and closer to retirement, the effect of making financial mistakes grows. Once you retire, your bed, as they say, has been made and you’re working from a pool of limited resources. Now, if you want to squeeze the maximum standard of living from what you’ve got, you’ll have to avoid mistakes and catch problems early to minimize their impact. With the rate of change in today’s world, yearly checkups are not enough. You need to monitor the status of your financial life more frequently. When balancing the costs and the benefits of monitoring, I find that a six-month checkup schedule is optimal.

Like a physical exam, a financial checkup can only tell you where you stand at that moment in light of certain assumptions about how you’ll proceed in the future. Your long-term financial health, or success, is a function of two factors: where you are today and what happens in the future. The road through retirement is littered with the bodies of hardworking people who had enough to retire comfortably but made mistakes that squandered that opportunity.

For me, or anyone, to tell you that you’re “OK” financially, assumes that you’ll manage your finances a certain way in the future. How can I possibly tell you that you have the resources you need to retire if I have no idea how you’ll make the myriad decisions you’ll have to make along the way?

One-time financial checkups are a selling tool — a “come-on” to get your attention and some other, more profitable, business from you. Don’t fall for it. Stop looking for financial advice and start looking for accountability.

If you ask me to take responsibility for your financial health — for ensuring that your financial goals are met — I’ll start giving you advice, instructions for achieving that end. And the first piece of advice I’ll give you is that you should submit to a checkup at least once per year if you’re under 40 years old, and at least twice per year if you’re older. That’s the only way that I can ensure your continuing financial health and take responsibility for the quality of my advice.