By Mike Miles
May 6th, 2013 | Uncategorized
Q. On reading some of Mike Miles’ column, I see him advising to invest in the L Fund most closely matching your life expectancy. So is he saying that at 60, I should invest, say, in L2040? Would he recommend this even if/when I begin withdrawing money regularly for retirement income replacement?
A. That is what I have recommended you consider doing if you’d like to maximize the standard of living your money will likely support over your lifetime. Of course, if you’re managing your money, you’re ultimately responsible for the outcomes.
April 22nd, 2013 | Uncategorized
Q. The guidance on partial withdrawals from the Thrift Savings Plan is somewhat confusing if you have both a traditional and Roth portion. It says that withdrawals will be prorated between the two. However, is it possible to solely roll over the Roth portion into another Roth and still leave the entire traditional portion in tact? Or, since these are two distinct types of investments, can the Roth be rolled over into a Roth and the traditional be rolled over into a traditional in amounts, say $5,000 of one and $10,000, even if the balances are not in this same 1:2 ratio?
A. Distributions are prorated between the two accounts, while direct transfers (rollovers) may be designated as applying to each type of money, independently. I suggest that you review Form TSP-77 to see what can and can’t be done.
April 9th, 2013 | Uncategorized
Q. I will have approximately $550,000 in my Thrift Savings Plan when I retire this year at age 60. In addition, I have other investments and will be receiving a federal pension. Using a 4 percent investment withdrawal rate and anticipating future Social Security benefits, my income will exceed expenses by 20 percent, so I may dial back the 4 percent to something less. Considering this and with a willingness to accept a moderate amount of risk, what would be an appropriate TSP fund allocation for a younger retired person?
A. I can’t tell you what is right for you without a lot more analysis and understanding. The exact nature of your financial goals and the timing of cash flows is critical to the decisions you face. It’s kind of like saying your head hurts and asking what you should do. The truth is that you should put the effort into figuring out the right thing to do before you do anything else. Otherwise, you’re just guessing and you’ll pay the price if you guess wrong.
As I have written many times, however, if you don’t KNOW what to do, you should consider choosing the TSP L Fund that most closely corresponds to your life expectancy, or your joint life expectancy if you’re married. This doesn’t guarantee that your goals will be met, however.
April 2nd, 2013 | Uncategorized
Q. I am 57 years old. I have about a year and three months with the Defense Department (FERS). I am in the process of buying back 14.8 years of service, and I plan to retire in about 12 years. Will the buyback help with the Thrift Savings Plan? What is a good TSP investment option for someone in my situation?
A. I’m not sure how the buyback will help your TSP account, since you will not be entitled to any additional contributions as a result. The investment strategy that you choose should be based on more information that you’ve provided here. If you’re not sure what to do, I suggest that you use the L Fund that most closely corresponds to your life expectancy — or joint life expectancy, if you are married. The problem is that it’s impossible to know exactly how much you can safely withdraw — and when — without more analysis, planning and management along the way.
March 26th, 2013 | Uncategorized
Q. Many experts are indicating that there is a bond market bubble growing. In addition, The Wall Street Journal survey report indicates that interest rates will be going up about a point in 2014. For the next year or two, would it be best to move money out of the F Fund and place it in the G Fund, or move monies out of both funds and place them in market funds like C, S or I? Since both G and F are invested in bonds, will increasing interest rates affect invested funds negatively?
A. I have been substituting G Fund for part of the F Fund allocation in my client portfolios for the past two years.
March 11th, 2013 | Uncategorized
Q. I am a GS-04, Step 10. My account balance as of Dec. 31 would provide me with a lifetime Thrift Savings Plan monthly amount of $451. As of this time, I contribute $300 every pay period to TSP. Let’s say my goal is to have a lifetime TSP monthly amount of $1,000. By how much would I have to increase my TSP amount each pay period? I am 52 years old. I am under FERS. If I was offered an early retirement, should I take it? Or should take the chance of getting furloughed for an uncertain amount of time?
A. Unfortunately, it is impossible to answer your question, since the answer will depend upon a number of factors including the rate of return on your TSP investment between now and the time of you buy your annuity, the sequence of the returns and how they align with your savings contributions, the way you manage your TSP account and the annuity payout rate in effect at the time of purchase. You should consider seeking the help of a trustworthy and cost effective investment adviser.
February 21st, 2013 | Uncategorized
Q. I am 37 years old, invested 100 percent in L2030. I have 25 years left to work, and I’m happy with 5 percent growth. I’m afraid of sequestration effects, so I’m planning to move 100 percent into G fund this week. I will move it back into L2030 after sequestration, when it posts three months of positive share price gain. Good plan or bad?
February 11th, 2013 | Uncategorized
Q. I am 55 with 13 years of service. My wife is three years younger than me and will work three additional years — until I am 65.
My Thrift Savings Plan balance is approximately $200,000, and I hope to retire at 62. My wife and I have other investments of approximately $300,000, totaling $500,000 (mostly 401(k), but approximately 20 percent Roth).
I understand that when I am retired and after we reach the “threshold,” I will pay one of every two dollars made. Is this true for dollars dispersed from Roth accounts? I understood them to be “tax-free.”
A. Distributions from a TSP account, Roth or traditional, whether or not they are taxable, do not count as earned income for purposes of offsetting Social Security benefits.
January 28th, 2013 | Uncategorized
Q. I have worked in the GS system for 13 years, and I have always taken out the maximum percentage allowed for my Thrift Savings Plan. For the past 13 years, I have put everything into the G Fund. I am not very educated on which funds to invest in. At this time, I have $165,000 in my TSP account. I would like to know which funds I should invest in and what percentage would best suited for me. I am 42 years old, and I plan to work until I am 65 to 67 years of age.
A. You’ve asked the big question: “Which allocation is best suited to YOU?” No one can answer this question properly without knowing a lot about you, your goals, resources, and constraints. Without the proper analysis and understanding, the best you can do is to choose the L Fund that most closely corresponds to your life expectancy.
January 23rd, 2013 | Uncategorized
Q. If I am 52 years old and have all of my contributions in the L Fund now at 100 percent, and expect to retire in 2028, what would you recommend on how to distribute my percentages among the other funds?
A. This is like asking what kind of car you should buy. The correct answer depends entirely upon what you expect the car to do. If you don’t know what to do, you can pick the L Fund that most closely corresponds to your life expectancy and use that. This is like choosing to buy a four-door sedan, though. It’s most likely to meet the needs of most people, but if you intend to use it to haul bricks, it might not work out too well.