Re: [TSP_Strategy] Re: TSP: Three Things You May Not Understand


Aug 10, 2017

 


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#41932 Aug 10, 2017

3 Things You May Not Understand About the TSPBy Tammy Flanagan3:55 PM ETIn last week.s column,we got into some Thrift Savings Plan issues that were fairlycomplicated, such as whether or not to take a lump-sum payment and useit to eliminate debt. This week, the TSP is the focus again, but I.llkeep things a little more simple.Here are the top three things that employees sometimes misunderstand when it comes to their TSP accounts.How Does Matching Work?One of the key features of the Federal Employees Retirement System isthat employees receive agency automatic and matching funds in their TSPaccounts.Here.s how it works: Your agency automatically contributes 1 percentof your basic pay (including locality pay) to your TSP account. It alsostarts matching your own contributions as soon as you start making them.So if you contribute 1 percent of your basic biweekly salary, you willreceive 1 percent in matching contributions, along with the automatic 1percent agency contribution.If you contribute up to 3 percent of your basic pay, the matching isdollar for dollar. If you contribute 4 or 5 percent of your basic pay,the matching on the additional contributions is fifty cents per dollarof your contribution. After you contribute 5 percent of your biweeklysalary, there is no matching agency money. That.s why some people sayyou should contribute at least 5 percent of your pay so you don.t .leavemoney on the table..It.s important to note that the matching is on a biweekly, notannual, basis. Just this week, I met an employee who was going to have$18,000 (the elective deferral limit for 2017) already invested in hisTSP account out of his salary by the end of August. So he won.t receivematching contributions from his agency until the 2018 pay year begins.If your TSP allotments stop for any reason during the year (forexample, if you voluntarily suspend your contributions, elect too large abiweekly allotment so you eventually exceed the annual limit, or take afinancial hardship withdrawal and thus aren.t permitted to contributefor a period of time), you will no longer receive agency matching funds.It.s important to evaluate your contribution strategy at thebeginning of each year to be sure you receive the full agency matchthroughout the year. To learn more, read the TSP pamphlet, Annual Limit on Elective Deferrals.What Is a Full Withdrawal?The concepts of full withdrawal and required minimum distributionsfrom the TSP can be confusing. Some people think a full withdrawalrequires a lump-sum distribution of their entire account balance. I.vealso heard people say that at age 70 ., you have to take all of your TSPfunds out of your account. Both statements are false. You.re neverrequired to withdraw your entire account balance in a lump-sum paymentunless you have a balance of less than $200.According to the TSP booklet, Withdrawing Your TSP Account After Leaving Federal Service,a full withdrawal is simply a designation of how much of your totalaccount balance you wish to withdraw as a single payment, series ofmonthly payments or a life annuity. You may designate 100 percent to oneof the options, or divide it between the choices.Suppose, for example, you designate 50 percent of your account to bewithdrawn via a cash payment. The TSP will pay this to you or allow youto transfer some or all of it to another retirement account, such as anindividual retirement arrangement. For the other 50 percent, you couldchoose a series of monthly payments or purchase a life annuity. Themonthly payments can be a specific dollar amount, or you can let the TSPcompute payments for you based on life expectancy charts.You can postpone deciding what to do with your money after youseparate from federal service, but you must make a choice after you areseparated and older than 70. to avoid a penalty. This election mustfollow the rules for required minimum distributionsestablished by the IRS. The same three withdrawal options are availableat the time you face this deadline, so you won.t have to deplete yourentire account balance in one lump-sum payment.It.s important not to deplete your TSP account too quickly. You need astrategy to make the money last as long as you live. Remember that theC, S, I and F funds may experience negative returns from time to time.Your account will continue to accrue earnings after you.re retired, andyou can continue to change the way your money is invested by makinginterfund transfers.Be aware of the impact of inflation as you make your post-retirementwithdrawal choices. According to the TSP, an inflation rate of 2 percentper year would reduce a $150,000 account balance to the purchasingpower of only $82,811 after 30 years. Continued earnings are importantto maintain your buying power. Volatility in returns can create anxiety.But keeping all of your money in the ultra-safe G Fund may not be theanswer, because it may not allow for enough growth to keep ahead ofinflation. This is why financial professionals emphasize maintaining ahealthy balance between all of your investment options. The TSP.s lifecycle funds can do this for you, adjusting investment choices to getmore conservative over time.A good rule of thumb is to never withdraw more than 3 percent to 4percent of your account balance in a single year and to maintain some ofyour account balance in the stock funds and the fixed income (F) fundto balance risk and return.Can You Really Catch Up With Catch-Up Contributions?If you are 50 or older (or will turn 50 during the calendar year),you can make additional contributions to your TSP account over and abovethe annual elective deferral limit ($18,000 for 2017). These are knownas .catch-up. contributions. In 2017, you can make an additional $6,000in contributions. There is no agency match for such contributions. Thefunds will be invested according to your most recent account allocationin the same manner as your regular TSP contributions.Catch-up contributions will not necessarily make up for notcontributing for the first 20 years of your career, however. It.simportant to understand the value of investing over long periods oftime. There is a powerful illustration of this on the TSP websiteshowing that an investment of $4,000 per year (of employee and agencycontributions) at a 6 percent average annual rate of return will have abalance of $54,699 in 10 years, $154,220 after 20 years, $335,288 in 30years and $664,722 after 40 years. You can try this for yourself byusing the TSP.s online savings calculator.The TSP is a critical element of the retirement planning toolkit forFERS employees. But to make the most of it, you need to know how itworks.Photo courtesy GotCredit.com

By Tammy Flanagan3:55 PM ETwww.govexec.com/pay-benefits/retirement-planning/2017/08/3-things-you-may-not-understand-about-tsp/140170/







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#41944 Aug 12, 2017

Hello Sarah��The market is at an all-time high. Can you summarize for the group what indicators signal a change to the group's strategy?

I travel mosy of the time, living out of a suit case. Following the market and even sometimes this group is a challenge. Thank you for your service.��

John

Sent from Yahoo Mail on Android On Thu, Aug 10, 2017 at 6:27 PM, sarah_oz@... [TSP_Strategy]TSP_Strategy@yahoogroups.com> wrote:



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#41945 Aug 12, 2017

Hello Sarah��The market is at an all-time high. Can you summarize for the group what indicators signal a change to the group's strategy?

Itravel mosy of the time, living out of a suit case. Following themarket and even sometimes this group is a challenge. Thank you for yourservice.��

John

Hi John,

Technical analysis indicators are what signal changes to my strategy, anyway.�� For now, I see no reason to change. I still believe that the S fund has the greatest potential of the various indices during this year, and should become most active in Oct, Nov and Dec.

Some factors to consider:

1. USD has been weak, short-term.�� It should begin to rebound soon.�� If not, the I fund may become the more productive route long term.�� But not yet, IMHO.

2. If the markets begin to move south, we'll monitor them to see whether they have the potential to move significantly further south.�� If so, we may move to the sidelines for awhile.�� Right now, there are no such problems long term.



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#41947 Aug 12, 2017

Sarah -Thank you for the explantion!

Sent from Yahoo Mail on Android On Sat, Aug 12, 2017 at 10:17 AM, sarah_oz@... [TSP_Strategy]TSP_Strategy@yahoogroups.com> wrote:



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#42049 Sep 15, 2017

Don't want to miss out on matching so I'm attempting to figure out how to ensure I maximize my contributions by the of the year, and to set myself up better for 2018. It is difficult to do since it the time it takes to process the changes to allocations can vary. Would appreciate any insight.



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#42050 Sep 16, 2017

im retired but my method was to max out the "catchup $5,500 (now $6,000?) as soon as you can in the beginning of the year to have that invested,divide by 26 the $16,500 $634.62 and also do that each paycheck, unless they increased it to $17,000 or more per year ($653.85/paycheck)if is difficult, but it determines your etirement income



From: "leefennema72@... [TSP_Strategy]" TSP_Strategy@yahoogroups.com> To: TSP_Strategy@yahoogroups.com Sent: Saturday, September 16, 2017 2:33 AM Subject: [TSP_Strategy] Re: TSP: Three Things You May Not Understand

��Don't want to miss out on matching so I'm attempting to figure out how to ensure I maximize my contributions by the of the year, and to set myself up better for 2018. It is difficult to do since it the time it takes to process the changes to allocations can vary. Would appreciate any insight.



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