tsp loans
Are TSP loans a viable choice?
/by AdminAre TSP loans a viable choice?
“No loans, no troubles” is the policy employed by many successful businessmen and empire builders but for people with low paying employments, this policy is often not applicable due to financial insufficiency. If you don’t borrow till you retire, you will lead an excellent post-retirement life but if you have to, where should you, as a federal employee be headed?
Without loans, your cash flows will always look beautiful and you will only see improvements. Another reason to avoid loans is that you won’t have to deal with any stress. But let’s assume that you absolutely have to. Should you borrow from your retirement account? Are TSP loans the way to go?
Taking TSP loans:
Taking loans from your retirement accounts is different from the traditional loan methodology. Let’s take an example to consider this: Say you having a 100 thousand dollar debt on your credit card and it has an interest rate of 10 percent. This entails that you will pay a handsome 10 thousand dollars every year or 830 dollars per month and this would be exclusive of the principal. If you pay this over a 5 year period, your monthly interest plus principal will amount to 2120 dollars roughly or over 1200 thousand dollars in total for a 100 thousand debt.
Another option would be to borrow the 100 grand from your TSP account. To counter this, you will have to pay the requirement amount through your pay checks. If you plan to take TSP loans, make sure that you consult the required people before doing so. The best part though is that the interest rates are considerably low. The maximum they get is a meagre 2.125 percent which is nothing compared to what the credit cards charge.
Yes, there are other complexities involved in this regard, but this is one option that you should have in your mind. Note that before you go ahead and take the loan, make sure that you have gone through the guidelines and know all the rules.
Federal Employees: Have you made Tax Considerations for TSP?
/by AdminTSP Tax Considerations
Understanding the tax treatment of Thrift Savings Plan (TSP) payments can help federal employees avoid making costly mistakes. The rules governing distributions from your TSP are complicated and the tax treatment of TSP Annuity is also complex, it is important to be informed and knowledgeable about the various TSP tax regulations. Tax rules vary depending on which method you opt for as you access your money or as you roll your TSP into an IRA and then subsequently withdrawal money in the future.
TSP Rollovers
If you opt for a TSP to IRA rollover, you withdrawal money from your TSP and deposit those funds into your traditional IRA or eligible employer plan. If you elect to receive the funds directly, instead of making a direct rollover, you have 60 days to re-deposit the funds into a qualified plan (like a 401k) or IRA.
Therefore, if you rollover your entire TSP balance, you will not owe any immediate taxes on the amount you move from plan to plan (TSP to IRA for instance). However, should you rollover only a portion of the money in your TSP and receive the remaining portion in a TSP distribution, you will owe taxes on the amount not rolled into your IRA.
TSP Withdrawals
Should you wish to withdrawal some of your savings from your TSP to make those funds available for living expenses, 100% of these withdrawals will become subject to Federal income tax, and might also be subject to a 10% early withdrawal penalty tax if the recipient is not yet 59 1/2 years old.
There are methods to withdrawal funds from your IRA designed to avoid these penalties and the rules governing the distributions from you TSP also take into consideration the potential need of a recipient to access these funds. – Generally the TSP is more generous with regard to the withdrawal options available. You should consult with your own financial professional before making any TSP withdrawal decisions to ensure you fully understand the impacts.
Note: The TSP cannot accept transfers from Roth IRAs.
More TSP Tips
/by Dianna TafazoliAdditional TSP tips
Each year the Internal Revenue Service (IRS) announces changes that might impact pension plans and other retirement accounts based on the change in the Consumer Price Index (CPI). Because the CPI did not warrant or meet the statutory criteria for the adjustment, the Thrift Savings Plan (TSP) limitation remains at $17,500 for 2014. For individuals over age 50, the catch-up contribution remains at $5,500.
PREPAYMENT OF A Thrift Savings Plan Loan
You can prepay your TSP loan without incurring a prepayment penalty. You can find out about the amount of your loan (principal and Interest) by going on to the Thrift Savings Plan website or by calling the ThriftLine.
Once your loan has been paid in full, the TSP will notify you and your payroll office. If payments continue to be deducted from your paycheck after you have been notified that the loan has been paid off, contact your payroll office immediately.
THRIFT SAVINGS PLAN LOANS AND WHEN PAYMENTS START
When you take out a Thrift Savings Plan loan, deductions for the monthly loan amount must start within 60 days of the funds being disbursed. Once the funds have been disbursed the Thrift Savings Plan will notify your payroll office to begin deducting the loan amount immediately.
POSTAL EMPLOYEES AND THE THRIFT SAVINGS PLAN
Postal employees can access their Thrift Savings Plan through LiteBlue.usps.gov (liteblue). Through LiteBlue postal employees can change, enroll or cancel their Thrift Savings Plan contributiosn. However, if a postal employee would like to make a Thrift Savings Plan fund transfer they will need to access their Thrift Savings Plan directly through TSP.gov or by phone.
P. S. Always Remember to Share What You Know.
Financial Advisors and Federal Employees
/by Dianna TafazoliI was recently asked if my trainer of financial advisors and planners interested in the federal workforce differed from training federal workers? Without missing a beat, I said most emphatically “It certainly does.” It is more intense because financial advisors for federal employees need to know more about the Federal Retirement Systems than the federal workforce themselves.
The Federal Retirement Systems probably have some of the best benefits you will find all things being equal. It, too, is a system of immense rules and regulations that can be undeniably complex, even for someone who has spent a career absorbing all of the nooks and crannies.
The Civil Service Retirement System (CSRS) often referred to as the old retirement system was enacted in 1920. The world has changed a number of times since then and many amendments have been made to the system. One must be constantly updated on the changes so as to be an excellent source of information dissemination. I find that many financial advisors and planners I work with who wish to begin helping the federal workforce think of simply helping the workers manage their money. There is nothing wrong with that premise only that would leave the federal employee missing out on a great number of potential benefits
Federal Employees Partnering with Financial Advisors
Financial Advisors and Financial Planners (really the same thing) are important pieces of the partnership needed to guide the federal employee workforce to safe harbor so that their sails can withstand the uncertainty of storms that will surely come in their lives. To strategize such a journey requires acquiring a very sound knowledge of the Federal Retirement Systems (FERS, CSRS, FEGLI, FSAFEDS, etc.).
We are not talking about becoming Federal Retirement Specialists, but we are talking about partnerships that will equip these professionals to help manage the financial resources of a very unique group of employees. When you cast your net to work with the federal workforce in helping to plan their retirement, it needs to be cast wide because federal employees are as diverse as their many duties and responsibilities.
Although there are two retirement systems technically, there are a number of aspects that apply to special categories of employees as well, like firefighters, air traffic controllers and law enforcement officials.
Yes, my approach to conversational training with financial professionals is much more intense and absolutely focused on ensuring they know the language of the federal retirement systems and its workforce so that they can give them the tools necessary to retire in comfort and security.
If the federal workforce gets a course in the basics of the Federal Retirement Systems, then the professionals they entrust to handle their hard earned money – get the ADVANCED-ZERO TOLERANCE version with lots of hand-holding collaboration. I learn as much from Financial Advisors and Planners as they learn from me. We are all invested in making life in retirement and before a little easier to maneuver for federal workforce.
Financial Advisors who are knowledgable in federal and postal benefits need to be able to help you with your TSP account and Thrift Savings Plan fund choices, your Federal Employees Group Life Insurance (FEGLI) selection (both while employed and any potential reduction elections that you might want) and also possibly help you with your FSAFEDS and FEHB elections.
P. S. Always Remember to Share What You Know.
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