555 Quince Orchard Road
Frequently Asked Questions
Answer: A retirement and investment plan established by Congress in the Federal Employees’ Retirement System Act of 1986 to provide eligible Federal employees savings and tax benefits similar to those offered by many private corporations in 401(k) plans. It is a defined contribution plan administered by the Federal Retirement Thrift Investment Board.
Answer: It provides the potential for more income in retirement; current tax reduction; and tax-deferred growth. If you are covered by the Federal Employees' Retirement System (FERS), you should participate because it is one-third of your retirement benefits; in addition to the FERS basic annuity and Social Security. While the FERS basic annuity and Social Security may have cost-of-living adjustment provisions, the TSP presents the only portion of your retirement package with the potential to outpace or grow at a rate that is greater than the inflation rate.
Answer: Short answer - as much as you can afford. The more you contribute while you are working should translate to more you will have available for retirement. There probably isn't a retiree who 'regrets saving too much for retirement. To get a more definitive answer, work with an advisor to prepare a Retirement Plan.
Answer: The TSP offers pre-tax (regular) as well as after-tax (Roth) contributions. Pre-tax (regular) contributions allow you to reduce your current tax liability because the deduction to fund your TSP contribution is made before taxes are withheld, resulting in a smaller amount of income subject to income taxes. You pay the taxes on the regular TSP when you start withdrawing your money from the account, presumably in retirement.
Roth contributions to the TSP are made on an after-tax basis. There is no reduction in your current tax liability for Roth TSP contributions. The benefit of the Roth TSP is the fact that when you start making withdrawals from the Roth TSP in retirement, those withdrawals are usually TAX-FREE.
Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Answer: Short answer - it depends on your individual situation. While the prospect of reducing your current income is attractive, just about every income source you will have in retirement could be taxed. The Roth TSP can act as a tax hedge; with the proposition that taxes can be greater when you retire than they are now, the Roth TSP should warrant some consideration as being part of your retirement planning strategy.
Answer: It depends on your individual situation (such as: age, risk tolerance, time horizon and other investments).
Answer: A participant in the TSP can withdraw funds under several circumstances:
Answer: An IRA provides flexibility.
Answer: In many cases it may be more cost effective for you to own a private life insurance policy. Also, your own policy will stay with you in the event you leave your federal position. We can run a cost comparison to help you determine which policy could be more cost effective for you.
Answer: We can provide a “needs” analysis to help you determine how much if any, life insurance you need for your personal situation.
Answer: The most basic reason is to determine if you will run out of money during your retirement. We look carefully at the expenses and goals you expect to have in retirement and the sources of income and assets that can be used in your retirement. We develop a customized plan for your situation, with scenarios structured for meeting your expenses and goals.
Answer: Yes, depending on your personal situation. If you want to provide Federal Employee Health Benefits (FEHB) to your surviving spouse; your surviving spouse must be the recipient of an annuity in some amount to continue the FEHB. To provide a survivor annuity benefit, you must give up a portion of your basic annuity. For CSRS and CSRS offset a little less than 10% of your basic annuity is given up providing a 55% benefit for your spouse. In the case of FERS, a full 10% of your basic benefit is given up providing a 50% benefit for your spouse. This is a yearly cost to a federal employee. Permanent life insurance may be a cost effect way to provide this benefit and keep your full basic annuity benefit.