By Mike Miles
Fund transfers
October 24th, 2012 | Uncategorized
Q. If I have $100,000 in my C Fund and 100,000 in the I Fund and transfer the balance to the G Fund, will the balance be $200,000 if nothing changes in the market overnight?
A. Yes.
Tags: account balance, C Fund, G fund, I Fund, transfer
Loan repayment
September 19th, 2012 | Uncategorized
Q. On June 26, I took out a $22,000 loan against my 401(k) plan for major home improvements. That equaled up to $376 per month taken out of my paycheck to repay this loan. Then, Aug. 1, my hours were temporarily reduced until the end of 2012 to 30 hours per week, which amounts to an additional $620 deducted from my pay monthly. This puts a serious hardship on my ability to pay my monthly obligations. Is there a way to legally stop payments to my 401(k) repayment, seeing as I had no idea my hours would be reduced, whereby affecting my ability to pay my monthly obligations, including my mortgage?
A. You may be able to re-amortize the loan to extend the term and decrease the payments. If you default on the loan, the unpaid balance due will be declared a taxable distribution from your account. While this may not be attractive, it’s not the end of the world.
Tags: 401(k), account balance, loan repayment, mortgage, taxable distribution
G Fund or L Fund?
September 19th, 2012 | Uncategorized
Q. I just changed my contribution allocations from 100 percent G Fund to 100 percent L Fund 2030. Would it make sense to transfer my fund balance that I earned with G Fund to the L Fund?
A. It’s impossible to give you reliable investment advice without the proper analysis and understanding of your unique circumstances, goals and constraints. How you manage your investments should depend directly upon what you expect that money to do and when. In general, though, unless the G Fund is holding money that is to be spent within the next few years, or that is part of a larger investment allocation, the appropriate L Fund would probably be a better choice.
Tags: account balance, fund transfers, G fund, investment, L Fund
Total vested account balance
September 4th, 2012 | Uncategorized
Q. My wife is asking for 93 percent of my total vested account balance. Does total vested account balance mean what was contributed by me over the past 12 years, or the total value of the account which includes Va contribution and growth?
A. It includes everything in your account except for Agency Automatic Contributions, which have not yet met the vesting requirement: “A participant is vested in (entitled to keep) the Agency Automatic (1%) Contribution in his or her account after completing 3 years of Federal service (2 years for most FERS employees in Congressional and certain noncareer positions).”
Tags: account balance, contributions, FERS, vested
TSP loan for retired active duty
July 9th, 2012 | Uncategorized
Q. I retired from active duty in December 2011. I accepted an appointment to a government service position in October 2011 and established a FERS Thrift Savings Plan account. I did not move any of my TSP account balance accumulated during my time on active duty into my FERS TSP account, so I currently have two accounts. Am I eligible to take out a loan against the TSP account balance still residing in my [previously] active-duty account? If not, can I transfer all or part of my [previously] active-duty account into my FERS TSP account with the goal of taking out a loan against my FERS TSP balance?
A. You must be in pay status to request a loan. Since you are no longer in pay status with respect to your uniformed services account, you cannot request a loan from your uniformed services account.
You may transfer your active-duty TSP account to your FERS TSP account subject to the following rules:
(a) An account balance can be combined with another once TSP is informed (by the participant’s employing agency) that the participant has separated from government service.
(b) Tax-exempt contributions may not be transferred from a uniformed services TSP account to a civilian TSP account.
(c) A traditional balance and a Roth balance cannot be combined.
(d) Funds transferred to the gaining account will be allocated among the TSP Funds according to the contribution allocation in effect for the account into which the funds are transferred.
(e) Funds transferred to the gaining account will be treated as employee contributions and otherwise invested as described at 5 CFR Part 1600.
(f) A uniformed service member must obtain the consent of his or her spouse before combining a uniformed services TSP account balance with a civilian account that is not subject to FERS spousal rights. A request for an exception to the spousal consent requirement will be evaluated under the rules explained in 5 CFR part 1650.
(g) Before the accounts can be combined, any outstanding loans from the losing account must be closed as described in 5 CFR Part 1655.
Tags: account balance, allocation, contribution, FERS, loans, military service, retirement, tax-exempt status, transfer, TSP
Retiring with outstanding TSP loan balance
May 29th, 2012 | Uncategorized
Q. I am planning on retiring in December, but I will still have outstanding balances owed on my Thrift Savings Plan loans. Will they take that remainder out of my TSP money when I withdraw it?
A. If you retire with an outstanding loan balance, the unpaid balance, plus interest, will be declared a taxable distribution. This money has already been deducted from your TSP balance, so it won’t be available for withdrawal if it has not been repaid.
Tags: account balance, interest, loan repayment, retirement, taxable distribution, TSP, withdrawal
Long-term care
October 14th, 2009 | Uncategorized
Q: Could you elaborate on a couple of statements you made in your “Mistakes to Avoid” column that appeared in the July 13 issue of Federal Times? At mistake No. 2, “not having enough insurance,” you said “Once you are retired, long-term care insurance is a prudent thing to consider.” Many feds signed up for the federal long-term care insurance program when it first became available years ago. Are you saying that most of us workers don’t need to get long-term care coverage until we’re actually retired? You stated “Many people follow this rule of thumb: ‘It’s generally safe to base your withdrawals in retirement on 4 percent of the starting investment balance, and adjust this dollar amount by the amount of inflation each year.’ But they don’t seem to realize this rule is only reliable if the portfolio stays heavily invested in equities over their lifetime.” Most likely the reason your clients don’t understand this is that no one (well, far as I know) has ever said the withdrawal amount is influenced by the type of assets in the account. Could you say more about how the account’s assets may influence how much can be withdrawn? Would someone withdrawing from an all G Fund Thrift Savings Plan account be able to safely withdraw 4 percent for example, the same as someone who had 100 percent in the C Fund, versus someone who had all their funds in one of the Lifecycle accounts? Or would each of them need to have a different rate of withdrawal strategy due to their accounts having way different allocations (and we’re assuming all other factors, such as account balance, age withdrawals begin, etc., are the same)? For those of us who don’t plan to remain heavily invested in equities in retirement, how should we go about determining what’s a “safe” rate of withdrawal?
A: You can stack LTC insurance on top of your disability coverage (disability retirement or insurance) if you want to, but I usually don’t recommend it until you’re near retirement. Ultimately, the decision should be based upon your particular circumstances. The withdrawal rate that can be supported should be determined — estimated, actually — based on a number of factors including the amount of money to be invested, the investment strategy or strategies to be employed, and the size, duration and timing of the withdrawals. There is not simple formula and the analysis can be quite complex, including the need for estimating probabilities to various future events. The way the money is invested definitely affects the maximum withdrawal rate. Whether a particular TSP investment strategy will support a given withdrawal rate depends upon how long the withdrawals must last. This is all the responsibility of a pension fund manager, which your employer assumed you would become or hire when it put management of the TSP in your hands!
— Mike Miles
Tags: account balance, age, factors, G fund, TSP, withdrawal