By Mike Miles
Paying off TSP loan after age 60
May 14th, 2012 | Uncategorized
Q. I have an outstanding Thrift Savings Plan loan, and I just turned 59. I plan to continue to work for some time. After age 59½, can I pay off this TSP loan from other personal funds, then immediately withdraw those funds from the TSP without penalty if I need them for other purposes? With no loan balance remaining, would I then be eligible to take out another TSP loan?
A. You may repay the loan, take a distribution and then take another loan, but 60 days must elapse between the two loans.
Tags: TSP distribution, TSP loan, TSP withdrawal
Mortgage and retirement
May 14th, 2012 | Uncategorized
Q. I plan to retire from the federal government in the near future (I will have 32 years). I wish to pay my house off ($74,000) with my Thrift Savings Plan earnings. Is this a good idea? The interest rate on my house is 5.75 percent, and I realize that 20 percent will be taxed when I decide to withdraw from TSP. Should I transfer to an outside facility? I do not wish to have a house payment when I retire.
A. It’s impossible to say whether this is a good idea for you without understanding and analysis beyond the scope of this forum. In general, if you can refinance your mortgage into a lower, fixed 30-year rate, it would probably be better to do so and keep your TSP money available to pay your bills, later. I wrote on the subject here: http://www.variplan.com/uploadedDocuments/1277733522Carrying_mortgage_into_retirement_can_pay_off.pdf.
If you’d like decision support on this issue, I can provide it. Visit www.variplan.com to learn more about my practice.
Tags: interest, mortgage, retirement, TSP, withdrawal
TSP withdrawals and Social Security earnings test
May 14th, 2012 | Uncategorized
Q. Do lump-sum Thrift Savings Plan withdrawals (either partial or full) that are made after retiring from FERS or CSRS count as wages for the Social Security earnings test? I found lots and lots of stuff saying TSP does not count as wages, but then also found something on the Social Security website that reads, “a Federal thrift Savings fund is treated as a trust in section 401(a) of the IRC. Therefore, employer contributions to your TSP are not wages, however your elective contributions to the fund are wages.”
A. What you’ve read is saying that your TSP payroll deferrals are counted as wages when computing Social Security taxes while you are working. TSP withdrawals are not counted as income for purposes of the earnings test after you retire and are eligible for Social Security benefits.
Tags: CSRS, FERS, lump-sum, Social Security, TSP
Rolling VC into Roth TSP
May 14th, 2012 | Uncategorized
Q. I am a CSRS employee who is considering retirement in 2013. I have a Voluntary Contributions account and also contribute to the regular Thrift Savings Plan. If I open a new Roth TSP account, would I be able to roll over my Voluntary Contributions account into the Roth TSP at retirement?
A. Based on the information available, so far, this will be possible. The CSRS Voluntary Contributions account is considered to be a tax-qualified, employer-sponsored retirement plan.
Tags: CSRS, Roth TSP, TSP, voluntary contribution
Not a federal worker
May 14th, 2012 | Uncategorized
Q. Can you recommend some funds where a retiree could put his money if he is not a federal worker?
A. Except for the G Fund, which is a cash equivalent that can’t be matched outside the Thrift Savings Plan (use a money market fund or equivalent interest bearing security with no risk of loss), the other four TSP funds are based on widely available indices. The C Fund is based on the S&P 500 Index, the S Fund on the Dow Jones U.S. Completion Total Stock Market Index, The I Fund on the Morgan Stanley Capital Europe, Australasia, Far East Index, and the F Fund on the Barclays US Capital Aggregate Bond Index. Any low-cost, exchange-traded index fund will work as a substitute for these. Try www.iShares.com or www.vanguard.com (Exchange Traded Funds), for examples.
Disability or 4 more years?
May 14th, 2012 | Uncategorized
Q. I am four years away from retirement at the Postal Service. However I have Parkinson’s disease, and I don’t know if I can hang in there. Any advice on whom I can contact regarding my options and what is best? Disability or trying to hang in there until 2016?
A. Continuing to work will produce a better financial result. The real question is whether the financial improvement is worth the suffering, and only you can make that decision. I can show you what the additional work will mean to you in terms of your lifetime standard of living. Visit www.variplan.com if you’re interested in contacting me.
Tags: Disability, Postal Service, retirement
TSP vesting
May 14th, 2012 | Uncategorized
Q. I am a FERS employee who did a one-year-and-one-day residency (366 days) at the Veterans Affairs Department. During this residency, I was a full-time (40-hour-a-week) employee receiving benefits (health care, annual leave, sick leave, etc.). However, I did not contribute to FERS or the Thrift Savings Plan during this year and my “term” of employment was allotted for only one year. After the residency, I was hired as a full-time employee at VA contributing to the FERS pension, and I still continue to work in the VA system.
1. Does this one year of residency count as a year of service toward my retirement in FERS?
2. Does this one year of residency count as a year of service toward my TSP computation date?
A. All federal civilian service counts toward TSP vesting requirements.
Tags: annual leave, FERS, health care, pension benefit, Service Computation Date, sick leave, TSP, vesting
Why move IRA to TSP?
May 14th, 2012 | Uncategorized
Q. In a May 6 column, you recommended moving my traditional IRA to my Thrift Savings Plan. Why? I am getting good performance from my traditional IRA portfolio. I am planning to retire between the end of this calendar year and the end of 2013. Tax rates are likely to increase next year. What will be my tax consequences of making this move this year versus next year? What are the consequences of waiting until after I retire to make this move?
A. The cost of investing is lower in the TSP, so the expected rates of return are higher than elsewhere, and the presence of the G Fund allows you to configure portfolios that produce risk/return characteristics that are superior to those available anywhere else. In short, if you use it right, the TSP is likely to produce better results than your IRA. There is no tax consequence to moving your IRA money into the TSP.
Matching contributions for Roth TSP
May 14th, 2012 | Uncategorized
Q. If I contribute to the new TSP Roth, would I still receive the agency matching contributions?
A. Yes, but the agency contributions go into your tax-deferred account.
Tags: matching funds, Roth TSP, tax deferred
TSP withdrawal options
May 9th, 2012 | Uncategorized
Q. As a federal law enforcement officer facing mandatory retirement in 2013, I have been looking closely at my Thrift Savings Plan withdrawal options. When I retire and I leave my complete TSP balance in the G Fund, can I request withdrawals whenever I want and for whatever amount I want?
I see that there are options for setting up a recurring amount each month or year, but can that be changed to month to month or whenever it is needed? For example, because receiving my full retirement pension amount in a timely manner will most assuredly not happen, would I be able to request a lump sum from TSP the month I retire and then wait a couple of months to see how things go, then request a recurring withdrawal every month for a while? And then, if I deem I don’t need extra money for a couple of months, stop the monthly payouts?
I do not want to buy an annuity. I just want to know how flexible I can be in withdrawing from the TSP.
A. You may take one partial withdrawal from the TSP during your lifetime. In addition to this partial withdrawal, you may take a full withdrawal, either as a lump sum or a series of monthly payments that either deplete your account or end in a final lump-sum withdrawal. You may change the amount of fixed monthly payments once each year, in January. Your question is answered in more detail at www.tsp.gov.
Tags: annuity, G fund, law enforcement officer, lump-sum, mandatory retirement, one-time partial, TSP, withdrawal