Module 1.4 Leverage Resources for Retirement
Module 1.4
Core PFRP For Transition
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Module 1.4 Leverage Resources for Retirement
Retirement Pensions
Questions to ask a potential employer
“When do company contributions start?”
“When will my account be credited with 100% of
company’s contributions as my own?”
“Does your company do a graduated vesting?”
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Module 1.4 Leverage Resources for Retirement
Retirement Pensions
Defined-Benefit Plan
Traditional company pension plan; ultimate retirement benefit is
definite and determinable as a dollar amount
Example is a military retirement pension
①
②
③
Funded mostly by the employer
Responsibility for payment of the
benefit & risk on funds invested rests
with the employer
Like separation pay &
unemployment pay, it is considered
a type of compensation
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Module 1.4 Leverage Resources for Retirement
Retirement Pensions
Defined-Contribution Plan
A qualified retirement plan in which the contribution is defined yet the
ultimate benefit to be paid is not
Examples are 401(k) and 403(b) plans, Roth 401(k), Thrift Savings Plan (TSP),
SIMPLE IRA, SEP, Employee Stock Ownership (ESOP), and profit sharing
①
②
③
④
Contributions are from the employee
A portion may/may not be matched by employer
Each participant has an individual account
The benefit at retirement depends on amounts
contributed + investment performance of account
⑤ Investment risk may rest solely with the employee
due to opportunity to choose from a number of
investment options
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Module 1.4 Leverage Resources for Retirement
Thrift Savings Plan (TSP) Options
• Leave funds in TSP account
• Roll your TSP into another eligible
account i.e., IRA, annuity, civilian
401(k)
• Withdraw your TSP funds completely
Some funds may include tax-exempt
contributions!
Contact ThriftLine
(1-TSP-YOU-FRST)
www.tsp.gov
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Module 1.4 Leverage Resources for Retirement
Early TSP Withdrawal
Before 59
1/2
Penalty
Taxes
Factor waiting
in a minimum
20%cost
tax rate
Not
will
a
Example
A premature withdrawal penalty
that
willwithdrawals
cost $2,000$10,000
Member
@ 42
minimum
of $3,000!
costs $1,000
balance from TSP
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Module 1.4 Leverage Resources for Retirement
New Tax Considerations
• No more automatic extension
on the April 15th tax filing
deadline
– Interest will be charged on
unpaid amount
• You may have to start paying
state taxes again if you weren’t
(this includes spouses)
• No more tax exempt allowances
• No more exemptions from
property taxes, sales taxes, etc…
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