By Mike Miles
December 2nd, 2013 | Uncategorized
Q. I plan to retire next year with 35 years of federal service (FERS) at age 56, and eligible to receive a Thrift Savings Plan supplement of about $18,000 per year.
Once I retire, I plan to work to earn approximately $38,000 per year. Of the earned income, I plan to contribute $17,500 to my 401(k) plan and an additional $5,500 toward the catch-up contribution. The remaining $15,000 will be reported as an earned income on my W-2 and Form 1040.
I plan to earn $38,000 for the year, so that my supplemental income will not be deducted $1 from my TSP supplemental benefit payments for every $2 I earned above the annual limit of 15,120.
Are the 401(k) and the catch-up contribution considered earned income that could reduce the $18,000 TSP supplement per year?
A. You’re talking about the FERS special retirement supplement, not a TSP supplement. Earnings you direct into a 401(k) plan are still considered earnings for the FERS Supplement Earnings Test.
October 7th, 2013 | Uncategorized
Q. I took the Voluntary Early Retirement Authority on Jan. 31 at my minimum retirement age. I had 26 years at the Postal Service under FERS. After 16 years of marriage, I became a widow. The only income I have is my annuity and the special retirement supplement from the Office of Personnel Management. Will I be eligible to receive Social Security benefits from husband at 60, and will they end at 62? When I turn 62, my supplement will end. I have $190,000 in the L2020 fund. Would it be beneficial to me to start receiving money from my Thrift Savings Plan at 62 and delay Social Security until full retirement at 66 years and four months. A financial adviser told me to roll over my money into an IRA when I turn 59½. Is that a good idea, or should I keep it in the TSP? Would you recommend the G Fund, since I don’t have money to lose?
A. Mike: It’s impossible to give you specific personal financial advice with this tiny amount of information. In general, however, you should invest your money in a way that gives you a high probability of achieving your financial goals with a minimum of risk. There is no one-size-fits-all investment strategy, even for someone your sex and your age. Investment management is an ongoing and complex process. The advice you’re being given about rolling over you TSP to an IRA sounds like a sales pitch to me. You should preserve your TSP assets as long as possible unless a trustworthy analysis indicates that it would be in your best interest to do otherwise. Your question about using TSP funds to delay claiming Social Security is worth considering, but, again, finding the right answer will require some analytic work.
Reg: To find out how your own Social Security benefit would interact with your Social Security survivor benefit, go to http://ssa.gov/pubs/EN-05-10084.pdf.
September 30th, 2013 | Uncategorized
Q. Are monthly Thrift Savings Plan withdrawals counted against the earnings limit for the special retirement supplement?
September 16th, 2013 | Uncategorized
Q. I plan to retire in December 2014, when I will be 60 years and six months old. I plan on drawing the special retirement supplement for about 1½ years. I would be taking approximately $1,000 a month from my Thrift Savings Plan. Would the amount I receive from TSP be counted as earnings toward my $15,000 yearly limit? Also, when I start to draw my regular Social Security check, will the amount I receive from TSP be counted as income also?
A. Mike: Your TSP withdrawals are not considered earned income for the purpose of means testing either the FERS supplement or Social Security old-age benefits.
Reg: No, the amount you receive from your TSP account wouldn’t be considered earnings. Only earnings from wages and self-employment count.
September 12th, 2013 | Uncategorized
Q. I’m a 57-year-old FERS employee with 21 years of service. My human resources benefits adviser said I will be eligible to retire on unreduced immediate annuity at 60 years old with 24 years of service. Would I be eligible for the special retirement supplement when I retire at 60 years old?
The HR benefits adviser also said I can retire now on MRA+10 provisions, but my annuity will be reduced by 5 percent for every year I’m under 62. If I retire now, since I’m over 55 years old, would I be able to withdraw my Thrift Savings Plan without penalty?
A. Mike: Yes, you will be exempt from the early withdrawal penalty on your TSP withdrawals.
Reg: If you retire at age 60 with at least 20 years of service, you’d be entitled to an unreduced annuity and the special retirement supplement. If you retired under the MRA+10 provision, your annuity would be reduced by 5 percent for each year (5/12 percent per month) that you were under age 60. Further, you wouldn’t be eligible for the special retirement supplement.
September 9th, 2013 | Uncategorized
Q. How will Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay affect my retirement benefits (annuity supplement, pension and Thrift Savings Plan withdrawals)? I am a Defense Department civilian, age 58, with 21 years of service under FERS.
A. Mike: You will have access to your TSP account, under the usual rules, without penalty following your separation.
Reg: Your annuity would be computed under the standard formula: .01 x your high-3 x your years and full months of service. There wouldn’t be any age penalty because you were retiring before age 62. And, since you have already reached your minimum retirement age, you’d immediately be entitled to the special retirement supplement.
August 6th, 2013 | Uncategorized
Q. If I retire early at 50 years of age with 30 years of service under FERS, I understand I’d have to wait until my minimum retirement age to receive the special retirement supplement. What reductions would I have in my retirement annuity? Would I be able to receive monthly Thrift Savings Plan annuity at age 50?
A. Mike: You may use your TSP money to buy an immediate annuity and receive monthly income payments at any age, once you are separated from service.
Reg: If your agency offers you a Voluntary Early Retirement Authority, there wouldn’t be any age-based reduction in your annuity. As noted, you wouldn’t receive the special retirement supplement until you reached your MRA.
July 1st, 2013 | Uncategorized
Q. Does the withdrawal of your Thrift Savings Plan annuity affect the amount of your special retirement supplement or Social Security if it exceeds the maximum amount of money you are allowed to make under Social Security?
July 1st, 2013 | Uncategorized
Q. I am a FERS employee with 29½ years of service. I am 54 years old. If they offer an early-out this year, could I take it without being penalized for the years before age 56? Would I be able to collect the special retirement supplement? Also, will I have a problem if I remove the money I have in my Thrift Savings Plan account?
A. Mike: If you separate from service before the calendar year in which you’ll reach age 55, your TSP withdrawals may be subject to the IRS early withdrawal penalty, but otherwise, you’ll have access to your TSP money through a partial or full withdrawal.
Reg: Because you have at least 25 years of service, you could retire at any age without penalty. However, you wouldn’t be eligible for the special retirement supplement until you reached your minimum retirement age, which in your case is 56.
June 26th, 2013 | Uncategorized
Q. I am a Postal Service employee under FERS. I am going to retire soon with 26½ years at age 60. Do I have to take the special retirement supplement, or can I waive it? If I take it, do I have to start taking Social Security at 62, or do I have an option to wait until I am older? If I decide to purchase an annuity with my Thrift Savings Plan balance from MetLife, is that annuity protected if MetLife folds?
A. Mike: A MetLife annuity is backed by MetLife. Your state may also offer some backstop in the case of MetLife’s failure. It’s not guaranteed by the federal government, if that’s what you’re asking.
Reg: There is no conceivable reason for turning down the special retirement supplement. You don’t have to apply for a Social Security benefit when you turn 62, you can delay that decision as long as you want.