Required Payouts

• By Tammy Flanagan
• April 12, 2013
• comments

Last week’s column, Understanding Your TSP Options, left at least one commenter wanting to know more about the issue of required minimum distributions from the Thrift Savings Plan:

I would like to hear more about payout options because I don't think it's wise to leave money in the TSP past age 70 due to the withdrawal limitations and risk of an RMD (required minimum distribution) penalty. Can anyone convince me otherwise?

The Internal Revenue Code requires that you receive a portion of your TSP account beginning in the calendar year when your age reaches 70½ and you are separated from service. The portion you’re required to take is called a required minimum distribution, or RMD.

Your entire TSP account is subject to the required minimum distributions. When you have traditional and Roth balances in your account, any withdrawals will be paid proportionally from each balance. Likewise, if you have an account that has both taxable and tax-exempt contributions, your distribution will be paid proportionally from each.

The TSP calculates RMDs based on your account balance and your age, using guidelines set by the IRS. The RMD computation will vary depending on the withdrawal option you’ve ...

Understanding Your TSP Options

• By Tammy Flanagan
• April 5, 2013
• comments

Since April is Financial Literacy Month, I’ve decided to devote this week’s column to helping you gain a better understanding of your Thrift Savings Plan investment choices.

At the end of 2012, TSP plan assets stood at $330 billion, with 4.6 million participants. This translates to an average participant balance of $70,000. At the end of 2011, the G (government securities) fund held the largest balance of any of the funds, at nearly $148 billion.

Here’s a quick quiz: Why do you think there’s so much money in the G Fund?

• It is viewed as safe.
• Investors fear losing money or having a negative return.
• The G Fund is the default choice if a participant doesn’t choose a different mix of funds.
• Many employees still covered under the old Civil Service Retirement System who participate in the TSP view it as more of a savings account (short-term investment) rather than a retirement account (long-term investment).
• Many people don’t understand the other investment options.
• Many investors fear the market risk associated with stock and bond investments.

The answer is all of the above. Just because almost half of all TSP funds are invested ...

Preparing in Advance

• By Tammy Flanagan
• March 29, 2013
• comments

This week’s column is inspired by a pamphlet prepared by the National Active and Retired Federal Employees Association for its members. The publication is called “Be Prepared for Life’s Events.”

NARFE formed in 1921, the year after Congress passed the law creating the Civil Service Retirement System. It represents the interests of nearly 5 million active and retired federal workers by providing them a voice before Congress. NARFE sponsors and supports legislation to protect the retirement benefits of its members.

I think of NARFE as a friend who is watching your back. It has a long history of organizing protests of efforts to trim federal benefits, such as one that helped lead to the repeal of the 1988 Medicare Catastrophic Coverage Act.

I recently had the pleasure of visiting NARFE Headquarters in Alexandria, Va., and found an organization that doesn’t look like it’s nearly 100 years old. I’ve been a NARFE member since 1988 and still look forward to receiving the organization’s monthly magazine and the updates posted to its website.

Now that I’m beginning to phase into my own retirement, I’m trying to make time for my local NARFE Chapter. Last ...

Thinking About Insurance, Part Two

• By Tammy Flanagan
• March 22, 2013
• comments

Last week, we began looking at how the need for various types of insurance changes as you progress through your career, focusing on the first two stages of the typical working life: early- and mid-career. This week, let’s look at the latter two stages: pre-retirement and retirement.

Pre-Retirement

Health Insurance: At this stage of life, you need to be sure that your health insurance coverage matches your health concerns. Do you have a chronic illness that requires expensive therapy or prescription drug treatment? Are you at risk of  heart disease, stroke or diabetes? Do you see a specialist on a regular basis? You should have a comprehensive health plan. Review your deductibles, coinsurance and catastrophic protection of your existing Federal Employees Health Benefits Program coverage. Compare your plan to others available to you, using the Office of Personnel Management’s online FEHBP tool.

It’s important to remember that health and life insurance coverage ordinarily must be in effect continuously for at least five  years before your retirement date or you will be ineligible to carry this benefit into retirement.

Life Insurance: By this stage, your needs for life insurance may be diminishing. Are your children grown and not ...

Thinking About Insurance Early

• By Tammy Flanagan
• March 15, 2013
• comments

Your working life can be divided into four stages: early career, when your adult life is beginning to take shape; mid-career, where you may have a growing family and increasing financial responsibilities; pre-retirement, when the kids may be grown and you have an empty nest; and retirement years, with more health care needs and a fixed income, but fewer financial responsibilities.

The cost and needs for different types of insurance will change as you go through each phase. This week, let’s look at the first two: early career and mid-career. Next week we’ll examine the latter two stages.

Early Career

Health insurance: At this stage of life, you need good preventative care and protection in case of an accident or sudden major illness. You might consider a health maintenance organization or lower-option preferred provider-type plan. Your focus should be on low premiums and good preventative benefits.

Life Insurance: Who is depending on you financially? If something happened to you, how would that affect them? What type of risk is involved in your lifestyle? Do you travel to places where an act of terrorism or an act of war is more likely? Do you carry a gun and a ...