By Mike Miles
November 18th, 2013 | Uncategorized
Q. I am 63 years old and will be retiring under CSRS in January. I have about $150,000 in my Thrift Savings Plan account. I have talked with a financial adviser who told me it would be better to buy from outside and cheaper than MetLife annuity. The annuity is from Prudential and has a living benefit rider. They claim it is the cheapest one out there. Can you give me any advice as to which annuity would be best?
A. Your “financial adviser” is not an adviser but a salesperson. Don’t be foolish. Now is not the time to buy a fixed annuity if you can avoid it. The payout rates are the lowest they’ve been in generations and that living benefit rider is an expensive insurance policy that is unlikely to pay off. Keep your money in your TSP account until you find someone trustworthy to advise you.
November 11th, 2013 | Uncategorized
Q. Are there any advantages and does it make sense to transfer my wife’s 403(b) account into my Thrift Savings Plan account before I retire? I am planning to retire in 2015 at age 55 with 33 years of service (CSRS Offset). Will TSP even allow a spouse’s account to be transferred into the TSP? She will be retiring in 2014. She is not federally employed.
A. It makes sense, and there would probably be advantages to doing this. But, alas, it’s not allowed.
October 30th, 2013 | Uncategorized
Q. I am a CSRS Postal Service employee and plan to retire at the end of 2014, when I will be 55 years old with 38 years of service (including sick leave). After reading other answers, I understand that I can immediately withdraw funds from my Thrift Savings Plan without penalty but would like advice regarding those withdrawals. Considering that TSP withdrawals are subject to regular income taxation, is it beneficial to move the funds to an IRA? Would I avoid any tax? Other than future growth potential and smaller tax rate, is there any benefit to delaying withdrawals until later in life?
A. You may roll over your TSP withdrawals that are not required to an IRA and continue to defer the tax to a later time. I can’t tell you whether this will be beneficial since I don’t know enough about you and your circumstances to make that determination. Better investment performance and tax management are the only reasons I can think of for delaying your TSP withdrawals. What more reason do you need?
October 21st, 2013 | Uncategorized
Q. I have been a CSRS retiree since Jan. 3, 2002. I turned 69 on July 14. What should I do with my Thrift Savings Plan funds at my age? What are my options?
A. You may invest your TSP money in any of the available investment funds or use the money to buy a life annuity. The investing option allows you to retain control of the principal but bring with it the risk of loss. The annuity will guarantee income for life, but you’ll give up the principal. You’ll have to determine which is appropriate for your particular situation. There is no universal solution for a 69-year-old CSRS retiree. I suggest that you start by looking at the annuity option and then use this a the benchmark for comparing the investment option.
October 15th, 2013 | Uncategorized
Q. I am a former employee that left employment with the federal government three years ago. I was under the old CSRS Offset system (23 years). I am 59 years old. It is my understanding that I can apply for my retirement at age 62. How do I go about doing that? Do I contact the Office of Personnel Management in Boyers, Pa.? Also, what forms do I need to complete? Is it possible to receive my retirement sooner than age 62? Do you have contact information for the OPM office?
I also participated in FERS (Thrift Savings Plan only, no match). How do I access these funds? Do you have the contact information for the TSP?
A. Mike: Visit www.tsp.gov for TSP account access and contact information.
Reg: If you didn’t take a refund of your retirement contributions when you left, you can apply for a deferred retirement at age 62. You can download the required form at www.opm.gov/forms/pdf_fill/opm1496.pdf and mail it to OPM when you’ve completed it. The address is on the form. If you need to reach OPM, you can call them at 1-888-767-6738 or 724-794-2005.
October 7th, 2013 | Uncategorized
Q. I worked in the Veterans Affairs Department (CSRS) from 1981 until 1985 and then left federal service and withdrew my retirement. I re-entered federal service in 2007 (CSRS Offset) and have enough money in my Thrift Savings Plan to pay the redeposit for my time from 1981 until 1985. Can I switch over the tax-deferred TSP funds to CSRS without having to pay taxes on the transfer? I know I can make an age-based (age 67) in-service withdrawal into a qualified trust or an eligible retirement plan (as defined in IRC 402 (c) (8)). Is CSRS considered an “eligible employer plan” for such a rollover? And finally, how do I make such a redeposit?
A. You must use after-tax money to make the CSRS redeposit, so a tax-deferred rollover from the TSP will not be allowed.
October 3rd, 2013 | Uncategorized
Q. I was first employed by the Defense Department in October 1982 and placed in CSRS. During a reduction in force, I lost my position in July 1994. In 1996, I withdrew my CSRS contributions and had them rolled into an annuity with American Express (now Ameriprise).
In November 1998, I was rehired by DoD and became a FERS employee. When I was rehired by DoD, I took the funds I had earned at my previous (1994-1998) job’s 401(k) and rolled them into the same annuity with Ameriprise.
I am now nearing retirement age and plan to buy back the CSRS time I lost by withdrawing my funds.
Can any of the annuity I have with Ameriprise be rolled into repaying my CSRS without any penalty or tax burden? I would think that, at the least, the amount that I withdrew in 1996 and rolled into the annuity could be rolled back into the CSRS. I am not trying to increase the amount of the CSRS, only to repay what I withdrew, plus interest due.
A. You made your original CSRS contributions with after-tax dollars and the money was not taxed when it was withdrawn. Your redeposit must again be made with after-tax dollars, so you can’t do what you’re asking about.
September 23rd, 2013 | Uncategorized
Q. After entering retirement from CSRS, are Thrift Savings Plan funds withdrawn classified as income in addition to the 20 percent accessed at the time of withdrawal from the TSP account. Are there ways to avoid double taxation if they are taxed twice other than rolling over into an IRA or Roth IRA?
A. The traditional TSP funds you withdraw are classified as ordinary income on your tax return. They are not subject to double taxation. The 20 percent withheld from your payment(s) is a deposit against your tax liability. If the distribution is not a required minimum distribution and you meet the timing limits, you may roll your distribution over to an IRA to avoid current taxation.
September 23rd, 2013 | Uncategorized
Q. I’m eligible to retire CSRS Offset in a few months. I was considering a Thrift Savings Plan loan prior to retiring to pay off other bills. I understand that upon retirement/separation, I would receive a Form 1099 for taxable income. Is this something I should consider?
A. If you don’t repay your outstanding loan balance within 90 days of separation from service, the amount due will be declared a taxable distribution and will be treated as though you took the money from your account on the date of the declaration. I believe that you should always consider all reasonable options when it comes to making important financial decisions.
September 16th, 2013 | Uncategorized
Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits in regard to the Thrift Savings Plan and what I do with the money in the TSP (when do I have to take withdrawals, etc.)? I am a Defense Department civilian, age 53, with 35+ years of service under CSRS.
A. Early retirement does not affect the rules governing access to your TSP account. The usual rules apply and they can be found at www.tsp.gov. In particular, you should understand the information contained in this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You’ll be subject to the early withdrawal penalty unless you qualify for one of the exceptions listed on the left side of Page 7.