Federal Retirement

You are here:
< Back

L1: Federal RetirementI am a federal DOT air traffic controller eligible for federal early retirement (25 years active service=any age). I will be 48 when I retire under CSRS (not FERS). Is my Thrift Savings Plan (TSP) a qualifying 401k plan eligible for a rule 72T disbursement? 2005-09-18 04:46, By: EVTiger, IP: [162.58.82.244]
L2: Federal RetirementHello EVTiger:
I think so; however, I have never read he plan documents for CSRS / TSP plans. Here is the acid test; if you can terminate employment & they will rollover your TSP account balance to an IRA; then it is a “qualified plan” within the meaning of IRC 401 & 72.
TheBadger
wjstecker@wispertel.net
2005-09-18 09:32, By: TheBadger, IP: [66.250.23.21]

L2: Federal RetirementHello EVTiger:
Iretired in 1992 from the Air Force, now a Financial Advisorand I work with a lot of retired CSR & FERS employees and their TSP. Short answer is that TSP is a 401(k) plan. I would like to have more dialogue with you but right now I’m headed on a trip and will be backthis Wednesday, 9-21-05. Talk with you then.
Jim2005-09-18 18:08, By: Jim, IP: [70.184.1.35]

L2: Federal RetirementGood morning EVTger. Sorry for the delay responding but I”ve been super busy and traveling quite a bit.
Again, short answer is that TSP is a 401(k) and can be used as part of the universe for your SEPP plan. HOWEVER, and this is a very big HOWEVER, I do not recommend this at all. Either get with a qualified planner if you need help or do it yourself and develop a good plan for distribution and growth. By this I mean you will probably be best served to establish at least two IRA”s; one for SEPP and the other for growth and future distributions. Then process an IRA Rollover to a money market IRA for all of your TSP assets, then split things out into the two IRA”s … SEPP and growth. TSP, like most plans, won”t allow transfers to multiple IRA accounts. If you use “trustee-to-trustee” transfers, which you should use, instead of actually taking “constructive receipt” of the funds and incurring the mandatory 20% withholding, then you can process an unlimited number of transfers to the IRA”s you need to get things set up.
Whether you do everything yourself or you use a financial planner is up to you and your abilities. But get the funds away from TSP! Remember that the “G-fund,” which is fixed rate and very safe as an investment, is not safe when the Federal Government needs money. Do you remember in the late 80”s (I think is the timing) and Congress didn”t pass the budget and shut down the government for a period? Do you also remember that funding to run the government for the short time came by using the TSP “G-fund” piggy bank? Need I say more?TSP does allow “systematic distributions” but it comes with a cost _ once it starts you can”t turn it off. So if you build a SEPP Plan with all of your money in TSP, then it doesn”t matter how far past age 59 1/2 you are or that your have satisfied the 5-year rule, you can”t make changes. I suggest you spend some good, quality time at the www.tsp.gov and read it all.
Hope this helps you with your dilemma.
Jim2005-10-05 10:39, By: Jim, IP: [70.184.1.35]

L2: Federal RetirementIt is not a 401(k) Plan but a 401(a) Plan and is eligible for section 72(t) distributions.2005-10-05 12:53, By: Joel, IP: [68.197.111.95]

L2: Federal RetirementJim:
TheTSP is not a 401(k)plan. Itis a 401(a) plan. The website says: The Internal Revenue Code, in 26 U.S.C Subsection 7701(j), states that the TSP is to be treated as a trust qualified under 26 U.S.C. Subsection 401(a) which is exempt from taxation under 26 U.S.C. Subsection 501(a).
2005-10-05 13:12, By: Joel, IP: [68.197.111.95]

L2: Federal RetirementHi Joel. You are right that TSP is a 401(a) and not 401(k). However, the basic function is the same or similar. The following two sentences taken from the front section of the web sitemakes my point:
The purpose of the TSP is to provide retirement income. The TSP offers Federal employees the same type of savings and tax benefits that many private corporations offer their employees under “401(k)” plans.
Unlike private plans … 401(k)’s … the TSP has very limited investment options and lousey payout options. When it started in 1986 it only had three investments called G-fund for government ie treasuries; F-fund or bond index; and C-fund for S&P index or common stock. Today it has a total of 6 investment options, all linked to indexes.
I still find no compelling reason to leave a dime with TSP when given the opportunity to move it away fromgovernment control. Low fees, one of the characteristics, is not worth it. In this case you really get what you pay for.
Jim2005-10-05 13:36, By: Jim, IP: [70.184.1.35]

L2: Federal RetirementJim,
Have you taken a look at the life cycle funds of the TSP? They were instituted on August 1, 2005. In my view a participant should invest all of his/her money in the L fund that matches the time when he/she expects to start a withdrawal program. There is absolutely no reason to pay an outside salesperson 200 basis points when you can get the same type of fund for 6, that’s right, 6 (six) basis points.
Peace and Hope,
Joel
2005-11-11 14:59, By: Joel, IP: [68.197.111.95]