Ask The Experts: Money Matters

By Mike Miles

TSP contributions

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Q. I will retire Jan. 2 in CSRS. I believe the paydays on Jan. 2 and Jan. 16 will be part of the 2015 TSP contribution year. Also, I believe that I can contribute up to 100 percent of my basic pay to TSP (which is what I would like to do for these last two pays). Would the 100 percent be whatever is left after all other deductions (taxes, FEHB, etc.) have already been deducted? Essentially, when does the 100 percent get applied?

A. The 100 percent is applied after all required deductions have been subtracted.

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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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TSP withdrawals

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Q. I retired September 2013 in CSRS after 40-1/2 years. I want to take out a one-time distribution equal to about 25 percent of my TSP account. Is is true I can only take out a one-time distribution or payout? I am over 59-1/2.

A. You are limited to one partial lump-sum withdrawal and a full withdrawal, which may be taken in the form of monthly payments. You must take the partial lump-sum withdrawal before beginning monthly payments.

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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 and VERA

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Q. Can I withdraw from my TSP if I accept a VERA with 30 years of service and my age is 47, or is there a penalty? If so, how much?

A. If you separate from service before the calendar year in which you reach age 55, you will be subject to an IRS 10 percent early withdrawal penalty unless you qualify for one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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Partial lump sum

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Q. How do I request a TSP partial lump sum after age 59-1/2? What forms do I need to fill out, and how long does the process take? I plan to keep working until age 63 and continue contributing to my TSP.

A. Use form TSP-75 to request an age-based, in-service withdrawal. Allow weeks for the withdrawal to be processed.

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IRA rollover

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Q. I retired in December at age 60 under FERS and my TSP is in the L fund because I plan to start drawing down to supplement my pension. My plan is to withdraw 4 percent per year based on a rate of return of 4.46 percent.
The amount of my account is $249,972, which has not been touched yet. I’ve sought the advice of several financial planners who have consistently advised me to roll over my account into a self-directed IRA due to the risk of interest/inflation’s effect on the bonds in the L portfolio, as well as the limitations of the diversification of all the TSP funds themselves. I’ve used the TSP calculator many times using different scenarios with favorable results, but I’m no financial whiz and not confident in my results. Should I move my savings into an IRA or is it better to stay where I am? These financial planners often cite the advantages of rollovers that include accessibility, more control, financial support and more diversification. I just want to be able to supplement my income without too much exposure, which is why I chose the L Fund. What are your thoughts on this? Read the rest of this entry »

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Wait for TSP withdrawal

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Q. If I’m still working at 70-1/2, do I have to start drawing my TSP, or can I wait until I retire at 72 or 73?

A. You may wait until you retire. Your first RMD payment is due by April 1 of the year following the calendar year in which you reach age 70-1/2 or retire, whichever is later.

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TSP withdrawal

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Q. I was told I can’t take money out of my thrift savings while I’m out of work on disability. Why not?

A. If you are still a federal employee, you are subject to the rules governing in-service withdrawals.

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One-time withdrawal

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Q. I retire in less than a month under FERS. As soon as I retire, I plan to use the option to withdraw my TSP in monthly increments that I decide every year (I am not using the life expectancy or annuity options). I also want to do a partial withdrawal (not much of it, just enough so I have a good savings account to fall back on). I know I can only do it once. I assumed, or read, that the one time had to be immediately upon separation. I do not really need the partial-withdraw funds right away, but do not want to miss the opportunity to do it. Can you do your once-in-a-lifetime partial withdraw any time after you retire? Read the rest of this entry »

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