Ask The Experts: Money Matters

By Mike Miles

TSP distributions

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Q. I’m in the FERS retirement plan and will retire March 31 from the Defense Department. At the time of retirement, I will have more than $300,000 in my 401k. I have two multiple-part questions:  1. Can I decide how much I want to take in monthly withdrawals and, if so, do I pay the 20 percent penalty monthly or do they take the 20 percent off the $300,000 before I even start getting my monthly payments? 2. If I leave my money in the TSP, do they continue to invest my money, and will I continue to earn interest off of my money and can I move the money around if I so choose? Read the rest of this entry »

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Girlfriend on annuity

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Q. I am 63 and will be retiring under FERS probably within the next two years. Am I allowed to have my long-term girlfriend on my TSP annuity?

A. Maybe:

“If you chose a TSP annuity that provides for a joint annuitant other than your spouse, the joint annuitant must be either a former spouse or someone with an insurable interest in you. This means that the person is financially dependent on you and could reasonably expect to derive financial benefit from your continued life.

Blood relatives or adopted relatives (but not relatives by marriage) who are closer than first cousins are presumed to have an insurable interest in you. If you name such a joint annuitant (i.e., a former spouse or someone with an insurable interest) who is more than 10 years younger than you, you must choose a joint life annuity with the 50% survivor benefit. The only exception is for a former spouse to whom all or a portion of your TSP account is payable pursuant to a retirement benefits court order.

If the person named as your joint annuitant is not presumed to have an insurable interest in you, you must submit an affidavit (i.e., a certification signed before a notary public) from someone with personal knowledge that the named person has an insurable interest in you.
The certifier must know the relationship between you and the joint annuitant and must state why he or she believes that the named joint annuitant might reasonably expect to benefit financially from your continued life.”

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Withdrawal eligibility

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Q. I was under FERS and I retired after 20 years. I was 55 then, and I am 57 now. When will I be able to withdraw my TSP?

A. Based on the facts you have provided, you may withdraw your funds at any time.

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TSP withdrawal

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Q. I am under the CSRS retirement system. I have 32 years of federal service. I am 56 and plan on retiring at 60. I contribute to the TSP, $17,500 per year and an additional $2,600 catch-up to the TSP per year. I am a GS-13/7. My high-3 would most likely be at this pay grade. How can I calculate how much my monthly annuity would be upon retirement so my financial adviser will have a better understanding of my situation upon retirement? I know about the ballpark estimates, but I would
like something a bit more concrete. When do I need to start withdrawing from my TSP fund upon retirement? At what age? Read the rest of this entry »

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Annuity eligibility

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Q. I was just hired by the VA (NTE only lasting 2 months, Excepted) at age 58. How long must I work before I am eligible for a monthly pension? How long must I work before I am eligible to keep retirement thrift plan? How long must I stay before I am eligible for retirement medical benefits?  I am assuming that I will find a permanent job but does this NTE time count toward something? Read the rest of this entry »

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TSP annuity

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Q. My question has to do with choosing to withdraw my TSP account upon retirement. I understand I can leave my balance with the government and either choose equal payments for my expected lifespan or have the government purchase an annuity on my behalf. What I do not understand is the difference between choosing equal payments for the rest of my life and purchasing an annuity solely for myself? What are the pros and cons for each? I also don’t understand why I am also given a choice to choose a survivor benefit with my wife as the beneficiary should I decide on the annuity available through the government. If I die before my wife, isn’t she entitled to my TSP balance regardless if I choose the equal monthly payout or the annuity? Since she is the beneficiary of my TSP remaining balance, why should I even consider purchasing an annuity with a survivor benefit when this will have the effect of reducing my monthly pay? She will get the remaining TSP balance should I die anyway, won’t she? I also would like to know  if I choose either option for withdrawing my TSP retirement funds, do I retain control of the balance? Can I still move the money around from the C, S, and I funds in order to sustain the longevity of my retirement account? Read the rest of this entry »

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TSP withdrawal

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Q. I’m trying to decide how to withdraw my TSP. I really do not need the income at this time. I’m 60 years old with no dependents or heirs. I have about $240,000 in my TSP. Is it possible to buy a life annuity with half now and take monthly payments later? I was also considering a life annuity with increasing payments and 10-year certain. Or would it be better to do monthly payments? From what I understand, I can adjust the payment once a year. Read the rest of this entry »

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Beneficiary in TSP

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Q. I have reviewed information at the TSP website. I have been unable to locate information regarding survivor benefits in the case of a nonannuity, monthly distribution without 10-year certain enabled. What are the rules in this most simple TSP account distribution plan?

A. If you die while receiving automatic monthly payments from your TSP account, the payments will end and the remaining balance in the account will be distributed to your beneficiaries.

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Annuity with qualified funds

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Q. So I’m retiring early, age 55, on the early out offer effective on July 31, 2014. I will begin monthly withdrawals from the Thrift plan at the rate of 20K per year as soon as I can, hopefully beginning in September 2014. I will receive my pension payment of 25K, and beginning in November 2014, I qualify to begin receiving the supplemental payment of slightly over 10K because I turn 56 on October 30, 2014.

I like the idea of eventually converting to an immediate fixed annuity at some point after I’ve managed my own distributions for a lengthy period of more than 10 years, maybe 15 years. I’m giving my background to ask a specific technical age requirement question about converting all my remaining funds to an annuity from qualified Thrift Account funds.

I’m being told by the guys at Vanguard that I can’t buy an immediate annuity or even a deferred longevity type annuity unless it starts at age 70 1/2, because these are “qualified funds.” That does not sound right to me. If I’m distributing my Thrift plan and meeting the required minimum distribution after age 70 1/2, why does it matter when I use qualified funds to buy an annuity? It shouldn’t matter if I’ve complied with RMD on the qualified funds prior to purchasing an immediate annuity even if I were 75 years old. Is the advice I’m getting from Vanguard correct? Do I have to convert thrift funds on or before age 70 1/2 or can I do it as late as 75 or 80?

A. I can’t speak for Vanguard, but generally you may use qualified plan money to buy an immediate annuity any time you like.

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Calculating tax withholding

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Q. I recently retired from federal service. I began receiving my FERS annuity Jan. 1. My annuity is $3,190 gross, plus $1,195 special retirement supplement, minus $190.28 health insurance and $36.34 for dental/vision. I am single with no dependents. I am withholding $641 for federal tax purposes. My state has no income tax.

I want to begin monthly distributions from the Thrift Savings Plan at $4,200 per month. How much should I elect to withhold to ensure that I am not hit with a substantial tax bill for tax year 2014? Assume no itemized deductions.

A. I’m not in a position to calculate your estimated tax liability for the coming year. You can consult a qualified tax preparer for help with this, or review Internal Revenue Service Publication 505 to figure it out for yourself.

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