Question
My husband will retire at age 60 with 38 yrs in combined Gvt. (special provision) and military. Due to Covid-19 our new home in FL. is now 1-2 yrs away right around retirement time. Should we use our TSP to pay for our new home in full or have a mortgage?
Answer
Great question. My big concern with using your TSP is that you have to pay taxes on any traditional TSP withdrawals. This means that if you take out a huge chunk of your TSP in one year then it could bump you into a much higher tax bracket.
If you have your heart set up using your TSP then it would be better to spread the distributions over several tax years so that it isn’t as big of a spike.
Question
I’m 63, retired from the Fed. Gov’t. (17 months now), drawing SS, and I’m struggling to find a strategy or plan to protect (taxes), grow (medium-high risk), make liquid, my TSP investment prior to reaching the RMD.
Answer
There are two things to think about in this situation. First, you will want to have to next 4-6 years of needed income in the G and F funds in the TSP. This way, your short term needs are not going to be very volatile. The rest of your money can be invested in the other funds that will grow faster over time.
When it comes to taxes, you should consider Roth Conversions from your traditional TSP to a Roth IRA in the years before RMD’s come into play. Roth IRAs are not subject to RMD so you will have more flexibility of where you take your money later.
Question
I am an RN with VA Med Center in Dallas, Texas. My current annual wage is $132k. I plan to retire in 2028, at which time I will be 64 years old, with 20.5 years of service. Regarding High-3, I want to try to maximize. Considering transferring to VA Med Center Palo Alto, California in 2023-2024. The current annual wage for my nursing specialty is $172,500 at that location, and they are frequently hiring. Although the cost of housing in Palo Alto is much higher than in Dallas, I believe the $40k bump in salary would offset the additional rent – probably would not buy. Am I correct in my belief that pension would be increased by higher salary, or is locality not taken into consideration? When I do the basic calculation, my pension rises from about $2600/month if I retire at Dallas VA to about $3200/month if I retire at PA.
Thanks – love your energy on YouTube.
Answer
I have good news for you. Locality pay does count towards your high-3 so moving to Palo Alto would affect your pension pretty significantly. And as you mentioned, even if the cost of living is significant it would increase your income for the rest of your life because your pension would be much higher.
Just remember, your high-3 is the average annual salary over the 3 years of your career that you got paid the most so you’d have to work there for at least 3 years to get the full benefits.
