TSP

Following is another pop quiz about federal retirement with a focus on the TSP and IRAs. Previous quizes here, and here.

1) Which of the following is not considered an Eligible Designated Beneficiary (EDB) under the SECURE Act?  A) Surviving spouse; B) 10 year-old child; C) Permanently and totally disabled person; D) 28 year-old child.

ADVERTISEMENT


D – 28 year-old child.  Children are considered EDBs only if they are minor children.  Once they reach the age of majority, they are no longer EDBs and will have to close out an inherited IRA within ten years.

2) True or False.  You automatically receive your Social Security Statement once a year.

False.  If you answered “true”, you were thinking about your TSP Participant Statement, which is sent out to all participants by the Thrift Board.  In order to receive a Social Security Statement, you have to enroll in “mySocialSecurity”.  Once you have a “mySocialSecurity” account you will receive an annual message with a link to your online statement.  If you don’t have an account, set one up today.

3) True or False.  It is against federal law for employers to cancel or suspend the employer match to employer sponsored defined contribution plans like the TSP.

False.  In fact, about 12% of private sector plans have suspended their matching contributions during the pandemic.  Back in 2008-2009, an even larger percentage of employers suspended their match.

4) Next year’s elective deferral amount for the Thrift Saving Plan will be: A) $19,500; B $19,000; C) $20,000; D) Beats me.

D – Beats me.  Tradition would lead one to bet on C – $20,000 because it is $500 higher than this year’s amount.  However, inflation has been low thin year and we might see no change.

5) True or False.  Congress has tried to lower the return of the G Fund in the past.

True.  Twice Congress has tried to tie the G Fund return to the return of short-term Treasuries, rather then the current benchmark of outstanding Treasuries with four or more years to maturity.  Expect them to try again.

6) The most popular TSP withdrawal choice is:  A) Individual payments; B) Annuities; C) Installment payments; D) Rollovers.

For a long time, the answer has been C – installment payments.  A lot of TSP participants are looking for monthly income from their investments and choose the installment payment route.  It remains to be seen whether the changes introduced by the TSP Modernization Act will change things.

7) True or False.  An individual who starts out taking life-expectancy based installment payments and then switches to installment payments of a fixed-dollar amount can, at a later date, return to life expectancy based installment payments.

False.  Although the Thrift Board did recently change the rules to allow participants to stop, and the re-start, life expectancy based payments, this does not change the IRS prohibition on reverting to life expectancy based payments after switching to a different withdrawal method.

8) The new TSP website is more user-friendly and easier to navigate than its predecessor.  A) Yes; B) No; C) It depends.

I vote NO!  Maybe I’m a curmudgeon, but I found it a lot easier to find information on the old site.  I suspect many will differ with me.  Find out for yourself by visiting the new website and checking out the features.

9) True or False.  The TSP is thinking about increasing the number of interfund transfers that are allowed each month.

False.  I received an inquiry via ask.FEDweek.com (you ought to try it) suggesting that it would make sense to allow a few more interfund transfers each month.  I checked with the TSP and this is not on their agenda.  They’re happy with the current limit of two unrestricted transfers per month.  Remember, you can make unlimited “safe harbor” transfers.

10) Since its inception the highest returning basic TSP Fund is:  A) The S Fund; B) The C Fund; C) The F Fund; D) The I Fund.

B – The C Fund.  Do, however, take care when comparing TSP Fund returns, especially those “since inception” returns.  TSP funds have been introduced at different times.  Of the four funds listed in the above question, two (C and F) were introduced in 1988, while two (S and I) were introduced in 2001, so the returns are really not comparable.

Pop Quiz: Test Your Federal Retirement Knowledge 1

Pop Quiz: Test Your TSP Knowledge

Timing Federal Retirement to Boost Your Annuity