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The Sweet Spots for Saving and Withdrawing Retirement Funds

“Wow, that one hit home for me!” People make this statement when they see their drive (in golf), serve (in tennis), or hit (in baseball) travel just as far and precisely as they had anticipated. Beyond athletics, the term “sweet spot” is also used to denote perfection. An investor may believe that the market has achieved its ideal level, where prices are high enough to stimulate sellers while remaining low enough to ensure a profitable investment for buyers. There are good times, even in retirement planning. The perfect moment to retire might occasionally come while you’re still working. You are at a position in your job and financial life when you can afford to save more money for retirement, with many years of development left before you start taking distributions from your retirement funds. This is often the ideal time to set aside as much as possible and rely on the market to help you out later. The period to save more for retirement might appear between the ages of 45 and 50, while you could meet the requirement to withdraw from your retirement funds around ages 57 and 65. However, there is another window of opportunity when you adjust your retirement assets free from IRS constraints, possibly after you retire. All retirement funds are exempt from the early withdrawal penalty once you reach the age of 59 1/2. In reality, the 10% early withdrawal penalty on money taken from your TSP at that time is waived if you leave federal employment in the year in which you turn 55 or later (50 for special category workers and even earlier for retired public safety personnel). You can take “in-service withdrawals” from the Thrift Savings Plan without incurring penalties if you continue to work beyond those ages and are still employed when you turn 59½ years old. Whether you are working or not, the early withdrawal penalty for IRAs is waived until age 59½. This advantageous period lasts until you turn 73 and have to start taking mandatory minimum distributions.
What can you accomplish in this advantageous position? Retirement funds can be transferred and redistributed without incurring any tax penalties. You can transfer funds from a standard IRA to a Roth IRA. You won’t be required to contribute an additional 10% as a penalty, but you will still be required to pay tax on the converted money. You could choose to convert to make sure you have sources of tax-free income in retirement. You need to watch your tax bracket in the year you convert to avoid moving up into a higher tax bracket or triggering one of the “stealth taxes,” such as increased Medicare Part B premiums. Of course, you won’t need to worry about paying Medicare premiums if you are under 65 at the time of the conversion and are not yet eligible for Medicare. You must begin receiving withdrawals from all retirement accounts, excluding Roth IRAs, once you turn 73, so you should now transfer as much money as you can into Roth IRAs.
Conclusion Too many seniors wind up relying heavily on Social Security to pay their daily costs, only to discover that more is needed. More than one in 5 married couples and 45 percent of single retirees rely on Social Security for over 90% of their wages in retirement, even though it is only intended to replace around 40% of the average worker’s pay. The truth is that while many manage to get by without ever creating and implementing a retirement plan, those who enjoy their retirement the most do so in part because they have one. Take advantage of the sweet spot when you find it. Set aside as much as possible in your TSP and other tax-advantaged retirement accounts if you still need to catch up to the sweet spot.
Contact Information:
Email: [email protected]
Phone: 6122163911

Mickey Elfenbein specializes in working with Federal Employees relative to their retirement benefit plans, FEGLI, TSP, Social Security and Medicare, issues and solutions. Mr. Elfenbein’s mission is to help federal employees to understand their benefits, and to maximize their financial retirements while minimizing risk. Many of the federal benefit programs in place are complicated to understand and go through numerous revisions. It is Mr. Elfenbein’s job to be an expert on the various programs and to stay on top of changes.Mickey enjoys in providing an individualized and complimentary retirement analysis for federal employees.He has over 30 years of senior level experience in a variety of public and private enterprises, understands the needs of federal employees, and has expertise built on many years of high-level experience.

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