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[TSPStrategy] Your pre-retirement questions answered, part 3

[TSPStrategy] Your pre-retirement questions answered, part 3

https://www.govexec.com/pay-benefits/2024/06/your-pre-retirement-questions-answered-part-3/397683/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20June%2028%2C%202024&utm_term=newsletter_ge_today

Your pre-retirement questions answered, part 3

The third in a series tackling your pressing questions.

This week's inbox questions focus on Social Security benefits. 

Q. I was told since I am single and I have no dependents, I can claim social security at age 62. Is this a good idea? 

Unfortunately, as it is with most retirement decisions, the answer isn't that simple. First, if you plan to work after age 62, there is an earnings limit that reduces your Social Security benefit by $1 for every $2 you exceed the limit (the 2024 limit is $22,320) until you reach your Full Retirement Age. Keep in mind that your Social Security benefit is reduced based on the number of months you file before your FRA. If your FRA is 67, your benefit will be reduced by 30% if you file for benefits at age 62. If you file at 63, the reduction is 25%, and at age 63 ½, it is only 22.5%. For example, if your benefit at age 67 is $3,000/month, it would be reduced to $2,100 at age 62 and increased to $3,720/month if you delay claiming to age 70. This is a permanent, lifetime reduction. It is a matter of receiving a smaller payment for more years or a larger payment for fewer years, remember that the end date won't change based on when you filed for benefits.   

One significant benefit of delaying your Social Security to age 67 or older is that you will receive the larger benefit for the rest of your life with annual cost of living adjustments.  This can provide substantial protection against financial insecurity in your later years, which is referred to as longevity risk! There is no incentive to delay filing for your benefits after age 70 since the delayed credits stop accruing at this age. 

Whether you claim your benefit at 62 or later, is based on your immediate need for this additional income, your future need to have income and other factors such as your health, inflation, as well as whether you are providing financial security for dependents. 

You may want to watch the following YouTube webinar presented by the Bipartisan Policy Center:  

Q. I don't understand the break-even age for claiming Social Security. Can you go over that? Thank you!  

The break-even age is the point in time when you will have received the same total cumulative income from Social Security whether you filed at age 62, 67 or age 70 (or any two ages you are comparing). For example, if you filed at age 67 you will receive benefits for 3 more years than if you filed at age 70. However, when you start your benefit at age 70 you will have received 3 years of 8% per year delayed retirement credits so your benefit will be 24% higher than the age 67 benefit. So, even though you would have received 3 more years of benefits by filing at age 67, the larger benefit you get by waiting until age 70 will catch up with the age 67 benefit by about age 82. In other words, at age 82 the total benefits you would have received if you started at age 67 and will be about equal to the total benefits you would have received if you started at age 70.   

Let's say your benefit at age 67 is $2,500. By age 82, you would have received $2,500/month or $30,000/year for 15 years for a total benefit of $450,000. If you wait until age 70, the monthly benefit amount would increase to $3,100 or $37,200/year. By the time you receive benefits to age 82, you would have received $37,200 for 12 years or a total benefit of $446,400.   

There are other variables to consider such as annual cost-of-living adjustments as well as how long you plan to work and how much do you need this income that Social Security provides. It is more important to decide when you will need the income from Social Security more than how long you will need to live to "break-even." Remember that if you die early, you won't need the money anymore, but if you live a long time, you probably don't want to run out of money. This decision is more flexible, but more complicated when a married couple is deciding when to claim their earned benefits or spousal benefit amounts.   

Q. My husband and I are both retired, he has CSRS, I have a private sector pension. Will he be entitled to spousal or widow's benefits from my Social Security? Will I be entitled to the CSRS survivor benefit if I receive my own Social Security retirement? 

You could receive a survivor benefit from his CSRS retirement, if he elected this at retirement, regardless of your own private sector pension benefit or your entitlement to Social Security retirement benefits. If you predecease him, the Government Pension Offset will reduce his entitlement to Social Security widows' and spousal benefits by 2/3 of his CSRS retirement. This will most likely eliminate his entitlement to any of the Social Security benefits that you would have otherwise earned for him.   

Let's hope that this onerous provision is eliminated by an act of Congress and supported by the members and the advocacy department of the National Active and Retired Federal Employees Association. NARFE reported that in a recent Senate Subcommittee hearing that Sen. Sherrod Brown, D-Ohio, who is the lead sponsor of S. 597 which, along with H.R. 82, is aimed at restoring full Social Security benefits to nearly 3 million Americans, shared: "These public servants dedicate their lives to keeping us safe, educating our children, and serving our communities, and they pay into Social Security just like everyone else… Social Security is the cornerstone of middle-class retirement security and should be available to everyone, including those who serve our communities…they should not be penalized for their service."  

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[TSPStrategy] How to use the ‘Bucket Strategy’ to optimize your retirement savings

[TSPStrategy] How to use the ‘Bucket Strategy’ to optimize your retirement savings

https://www.govexec.com/pay-benefits/2024/06/how-use-bucket-strategy-optimize-your-retirement-savings/397633/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20June%2027%2C%202024&utm_term=newsletter_ge_today

How to use the 'Bucket Strategy' to optimize your retirement savings

COMMENTARY | There are ways to strategically withdraw money in retirement to make your funds last longer.

You've finally reached the retirement date that's been circled on the calendar for the past 5 years. You've done everything you're supposed to do and have accrued a nice pension, a plan for social security, and a healthy balance in your Thrift Savings Plan, or other investment accounts. Maybe you've even done some tax planning and have a portion of your money in Roth accounts. 

The race that you've been running your whole working life is over, and you feel like you've won. 

Or is it? In reality, you're only halfway through the race, and it can get even more complex from here. 

As important as it is to save for retirement, making those savings work for you in the most efficient way takes a lifetime of planning and strategy. 

For federal employees, retirement planning can be particularly nuanced due to factors like the pension, TSP and other unique benefits. 

So, how do we use this nest egg that we've worked so hard to grow in the most efficient way? How do we invest now that we also need to preserve that money? Can we still afford to take risks in the market now that we're retired, or should we make everything more conservative? 

For our clients, we use something called the "Bucket Strategy" to outline their retirement spending and make sure every dollar is being put to its best use. 

Sequence of Return Risk

The stock market is a powerful tool that allows our money to work for our benefit and compound over time, but the price we pay for that growth is volatility. The stock market may have positive average returns over time, but that doesn't mean every year is positive. 

As a matter of fact, one of the biggest mistakes that people make when entering retirement is that they assume "straight line" returns instead of preparing for the fact that the market could be down in their first year or two of retirement. 

Take a look at the following example. 

Retiring at 65 with $1m seems like a slam dunk. But what if your retirement lines up with a recession and the market is down for the first 3 years? 

Even though the average return is 5% in both scenarios, since the first 3 years were negative in the second scenario, it resulted in substantially less money available by the late 70s. 

If your retirement plan requires $50k from your portfolio each year, that doesn't necessarily change just because the market is down. 

And that's where the "Bucket Strategy" comes in. The entire purpose of this strategy is to have money allocated so that you never have to withdraw from the market when it's down. 

The Bucket Strategy

The Bucket Strategy is a simple yet powerful approach to managing retirement withdrawals, providing both stability and growth potential over the long term. Let's break down how it works and why it can be especially beneficial for federal employees:

Income Planning: Before implementing the Bucket Strategy, it's essential to assess your retirement income needs. Determine how much you'll need from your retirement savings each year in the future. This is not your total expense. This is just what you'll need after your pension, Social Security, and other guaranteed income sources have paid.  

To do this, you'll need to have a relatively accurate estimate for your expenses – including essentials like housing, healthcare, and daily living, as well as discretionary spending for travel, hobbies, and other activities.

Time-Bound Categories: Once you have a clear understanding of your income needs, divide your retirement withdrawal requirements into three time-bound categories based on when you'll need the funds:

  • 1-3 Years: Allocate funds needed within the next 1-3 years into this category. These funds should be kept in very conservative, liquid investments such as cash, money market accounts, short-term bonds, or certificates of deposit. 

The goal of this "bucket" is to preserve capital and ensure easy access to funds for short-term expenses without exposing them to market volatility.

  • 4-6 Years: Funds needed within the next 4-6 years should be allocated to relatively conservative investments. While still prioritizing capital preservation, you can consider investments with slightly higher potential returns than cash equivalents. Examples include mid-term bonds or a conservative-to-moderate allocation within your TSP or outside investment account.
  • 7+ Years: Funds not needed for 7 or more years can remain more aggressive. This category can include a diversified mix of stocks, bonds, and other growth-oriented investments within your TSP and other retirement accounts. Since these funds have a longer time horizon, they have the potential to withstand market fluctuations and benefit from long-term growth.

Withdrawal Flexibility: The beauty of the Bucket Strategy lies in its ability to provide a steady stream of income while allowing you to weather market downturns without selling investments at a loss. By having sufficient cash reserves in the short-term bucket, you can fund your living expenses without relying on selling investments during market downturns. Meanwhile, the longer-term buckets can remain invested, giving them time to recover from market downturns and potentially grow over time.

To put this in perspective, the 2008-2009 market crash around the Great Recession had an initial peak in October 2007, before the S&P 500 fell 50%+ and bottomed out in February  2009. But, if you remained invested through all of that, you would have made your money back by February 2013.

That's about 5.5 years from the top of the market, through the crash, and back to where you break even again. 

Therefore, if you have enough "conservative" money to get you through 6-7 years, it should allow your more aggressive money to ride out even an extreme market event like the great recession. 

And what's the benefit of leaving some of your money more aggressive?

Well, if you would have invested at the "worst" possible time in October 2007, but left your money invested until 2024, you would have more than tripled your account value. 

If you're lucky, your retirement is going to last a long time. Using this strategy allows you to preserve enough of your money to maintain your cashflow, while the rest of it potentially grows so it can continue to benefit you and your loved ones. 

The TSP Shortfall: Unfortunately, the Bucket Strategy is very difficult to implement within the TSP. Since all TSP withdrawals are taken proportionately from each of your investments, you can't dedicate one particular fund as your short-term "bucket" and only draw from that fund for the next 3 years. 

On the other hand, with accounts outside of the TSP, you can pick and choose which investments you sell. This could allow you to only sell from bonds if the stock market is down, or vice versa. 

The TSP has a lot of great qualities, but this is one example of why some retirees consider moving money into IRAs in retirement. 

Regular Review and Rebalancing: As with any investment strategy, it's crucial to regularly review and rebalance your buckets to ensure they align with your evolving financial needs and risk tolerance. 

If the market is doing well, you may decide to take distributions from your more aggressive "buckets" or use them to "refill" your short-term accounts. This is a dynamic strategy and is meant to be tracked and maintained throughout your retirement. 

By implementing the Bucket Strategy for retirement account withdrawals, Federal Employees can have the confidence knowing they have a structured approach to managing their retirement income while maximizing the growth potential of their savings. 

Consult with a financial advisor experienced in retirement planning to tailor this strategy to your specific financial situation and retirement goals. With careful planning and disciplined execution, you can set yourself up for a financially secure and fulfilling retirement.

Austin Costello is a certified financial planner with Capital Financial Planners. If you don't feel confident in your current or future retirement withdrawal strategy and would like feedback, you can register for a complimentary check up. For topics covered in even greater depth, see our recorded webinars.

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[TSPStrategy] Your Pre-Retirement Questions Answered, Part 2

[TSPStrategy] Your Pre-Retirement Questions Answered, Part 2

https://www.govexec.com/pay-benefits/2024/06/your-pre-retirement-questions-answered-part-2/397446/?oref=ge_retirementplanning_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=Retirement%20Planning:%20June%2021%2C%202024&utm_term=newsletter_retirement_planning

Your Pre-Retirement Questions Answered, Part 2  

The second in a series tackling your pressing questions.

Here, I answer more of your questions from my inbox.

Q. I am 63 yrs. old and will retire in two years (65 years old) or earlier, does it make sense for me to invest only in the G Fund now vs. L 2025 Fund. 

According to the Thrift Savings Plan website, the L 2025 Fund's investment objective is to achieve a moderate level of growth with a moderate emphasis on preservation of assets. The Fund's allocation in the G, F, C, S, and I Funds is adjusted quarterly. The L 2025 Fund will roll into the L Income Fund automatically in July 2025 when its allocation becomes the same as the allocation of the L Income Fund.   

Unfortunately, without more details pertaining to your circumstances, goals, objectives and risk tolerance, this question cannot be answered.

However, I would caution against being too conservative. If the TSP is not your only source of retirement savings, this could be important in determining allocation between all of them. The amount of income you will need from the TSP to meet your monthly living expenses is another consideration in how to allocate your funds. There is a rule of thumb for allocating your retirement savings called the "age minus 100 rule." The result is the percentage of your assets you should put in stocks, also referred to as "equities" which in the TSP, would be the C fund, S fund, and I fund. You thus would have a 35% allocation to stocks at age 65. The rule is based on the idea that younger investors have a longer time horizon and can afford to take on more risk, while older investors' time horizons shorten, and they can't take on as much risk. However, there are many financial professionals who say the rule, like any "rule of thumb," has some exceptions and should only be considered a starting point: 

  • Life expectancy: The rule was created when life expectancy in the US was much lower, so you might want to add 10 or 20 years to it. 
  • Spending needs: Your actual asset allocation should depend on your spending needs as they relate to your assets or income sources. 
  • Risk appetite: The rule depends on your appetite for risk. For example, if you're more financially stable, a 70% stocks / 25% bonds /5% cash retirement strategy may be better.  

Research by Wade Pfau and Michael Kitces shows that the 100-minus-age approach has delivered the worst outcome in a poor stock market. The best way to determine the best investment strategy for your situation is by consulting a financial professional before you make any investment decisions.  

Q. Will the TSP automatically send me a Required Minimum Distribution at 73? 

If you do not elect a withdrawal that satisfies your RMD in the year you turn 73, the TSP will automatically send an amount to satisfy the remaining required amount. The required beginning date for your first RMD is April 1 following the year you turn 73. However, if you delay until the following year, you will have to take two RMDs that year. One for the year you turned 73, and one for the current year. On Dec. 20, 2023, the TSP processed any remaining RMD amounts for 2023. For income tax purposes, these payments will be reported to the IRS as income for 2023. For income tax purposes, these payments were reported to the IRS as income for 2023.   

Q. Is it permissible to take a portion of my TSP towards the annuity option and still have the flexibility with the balance of my TSP for partial and installment withdrawals?

You can take a partial distribution of part of your account even if you're currently receiving installment payments or have purchased a TSP annuity with a portion of your account balance. There is no longer a 30-day waiting period between withdrawal requests, so if you request a withdrawal from your TSP account, you no longer need to wait 30 days to request another withdrawal. You can now complete your withdrawal requests entirely online in My Account. You can stop, change, or start your installment payments anytime. You can learn more by reviewing the TSP Distributions bookletTSP Annuity Fact Sheet, and the Tax Rules About TSP Payments booklet.

Q. Do you have advice on what method is best when you must withdraw money from TSP (minimizing taxes): partial withdrawal or monthly withdrawal (i.e., $150,000 once or $12,500 a month for 12 months)? 

The total amount you take out in the year is what matters. A $150,000 lump sum payment or monthly installments of $12,500 will result in the same tax liability. 

Q. Where would I look on the TSP website if I want to request a withdrawal from my pre-tax traditional TSP money and not from my balance invested in the TSP Roth portion of my account?   

To request a TSP withdrawal after you leave federal service and to designate the money distributed from Roth or Traditional funds, log in to My Account to begin the request or contact the ThriftLine. Check out the TSP Booklet on Distributions and the booklet on Tax Rules About TSP Payments.  

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[TSPStrategy] Your pre-retirement questions answered, part 1

[TSPStrategy] Your pre-retirement questions answered, part 1

https://www.govexec.com/pay-benefits/2024/06/your-pre-retirement-questions-answered-part-1/397359/?oref=govexec_today_nl&utm_source=Sailthru&utm_medium=email&utm_campaign=GovExec%20Today:%20June%2014%2C%202024&utm_term=newsletter_ge_today

Your pre-retirement questions answered, part 1  

The first in a series tackling your pressing questions.

Since I will be traveling over the next few weeks, I thought it might be a good idea to reach into my mailbag (email "bag" that is) and share some questions that have come from other federal employees who are planning for retirement. Sometimes it seems that the more you learn about getting ready for retirement, the more questions you have about getting ready for retirement. These questions range from the continuation of insurance to the basic retirement benefit under FERS/CSRS, as well as confusion about claiming Social Security and TSP distributions.  

FERS Basic Retirement Benefit 

Q. I hear people referring to the minimum retirement age of 62 and 57 and then sometimes it is called the full retirement age of 67. Was this for Social Security or FERS?  

Eligibility for the FERS Basic Retirement Benefit (aka government pension) is determined by your age and number of years of creditable service.  In some cases, you must have reached the Minimum Retirement Age to receive retirement benefits. The minimum retirement age for FERS is between 55 and 57. 

The full retirement age for Social Security is between 65 and 67. If you were born in 1957 or earlier, you're already eligible for your full Social Security benefit. The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. Age 62 is the minimum age to claim Social Security retirement benefit. 

Q. If I retire at 57 with 35 years, any suggestions on dealing with the no COLA until age 62? 

A 35-year career should be enough to retire comfortably, but there are some variables to consider. Along with FERS delayed/diet COLAs, other considerations include: 

  • Have you determined how much of your pre-retirement income that you will need to live comfortably in retirement?  Remember that you will have to allow for income tax and insurance withholdings from your retirement income.  Be sure that your retirement estimate includes these withholdings and allows for a reasonable estimate of federal and state (if applicable) taxes.  
  • Will you be electing survivor benefits for a spouse?  Be sure to consider this reduction from your FERS benefit.  Also consider any benefits that might be payable to a former spouse.    
  • Determine how much you will need to withdraw from your savings to supplement your FERS retirement benefit before and after age 62.  Have you planned for how you will manage your TSP withdrawals and investment allocation after you retire? 
  • Do you have a plan for unexpected expenses?  The biggest could be future long-term care needs.   

Be sure to have enough money to cover your living expenses over those first five years of your retirement from ages 57 to 62, considering that there won't be an increase in your government pension benefit to offset the impact of inflation added to your current costs.  

For example, if you can live on $5,000/month net income and your FERS Retirement with Supplement provides $3,500 of the total needed (after withholdings for taxes and insurance), then the rest will need to come from your TSP and any other retirement savings. You will need to add an additional $150/month to the $5,000 that you estimated to cover your income needs after the first year if inflation is at 3%($5,000 x 103% = $5,150). This additional need will compound with future inflation. For example, in the second year, you will need an additional $304 /month over the initial $5,000 estimate ($5,150 x 103% = $5,304), then $463 / month the third year ($5,304 x 103% = $5,463).   

If you can delay TSP withdrawals by going to work after retirement, this could be another solution. The next job doesn't need to offer benefits such as health insurance since you will have that with your retirement.   

If you aren't planning to go back to work, then the only other place to allow for inflation is by taking larger distributions from your retirement savings or to reduce your spending to offset the added need. Be sure that you have adequate savings in your TSP to be able to adjust your withdrawals each year without depleting your account too soon.   

It might be prudent to seek assurance from a fiduciary financial professional to be sure that it wouldn't make more sense to continue to work a few more years to increase your FERS benefit and allow your savings to continue to compound.   

You will begin receiving COLAs after reaching age 62.  https://www.opm.gov/support/retirement/faq/cost-of-living-adjustments/  

Q. I would like more info on how the retirement date impacts your COLA.  

Let's say that you retire on July 31, 2024, and you are either retiring under CSRS or FERS (under FERS, you must be 62 or older to receive the COLA in most cases).  Your retirement benefit would be the same dollar amount for August, September, October and November. On Dec. 1, 2024, you would receive 4/12 of the 2024 COLA.  This would be paid on Jan. 1, 2025 (this is your "December" payment). If you are retiring under FERS and you are, let's say, 58 years old, you would not receive any COLA until the year that you reach age 62. Your payments would stay the same until then. Certain retirees, like disability, survivor, and other special provisions, have different COLA entitlement rules. 

Q. I have heard that retiring on the last day of the month is a good idea, how do pay periods figure into when to retire? Should a person retire at the end of a pay period as well?  

If you choose the end of the month that is also the end of a pay period (such as June 29, 2024, Nov. 30, 2024, Dec. 28, 2024, May 31, 2025, and Oct. 31, 2025, for most federal payroll systems, but not USPS), this means that your retirement will commence on the 1st day of the following month and you will earn your last leave accrual for working 80 hours for the last pay period.  If you retire at the end of the month that is not the end of the pay period, then your FERS retirement benefit will commence on the firstday of the following month, but your last leave accrual would be for the last full pay period that you completed. For example, if you decide to retire on Friday, Aug. 30 (or Saturday, Aug. 31), your last leave accrual would have been for leave period 16, which ends on Aug. 24. Under FERS, an immediate, voluntary retirement commences on the first day of the month following your retirement date.   

Q. I have heard that I can roll over my lump sum annual leave payment directly to an IRA so that I won't have to pay tax on this money until it is withdrawn from the IRA. Is this true? 

Unfortunately, the lump sum annual leave payment is unpaid compensation, and it is taxable in the year that you receive this payment. You are not able to contribute to the TSP out of this payment and it cannot be transferred directly to an IRA without paying taxes on this payment.   

According to the IRS: If you're a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2 for the year that you receive the payment. You can open and make contributions to a traditional IRA if you (or, if you file a joint return, your spouse) receives taxable compensation during the year. You can have a traditional IRA whether you are covered by any other retirement plan. However, you may not be able to deduct all your contributions if you or your spouse are covered by an employer retirement plan.  

If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2.   

Your total contributions to both your IRA and your spouse's IRA may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less. It doesn't matter which spouse earned the income. 

Roth IRAs and IRA deductions have other income limits. See IRA Contribution Limits and IRA deduction limits. 

Q. Is it possible to receive a refund of my contributions from FERS that are deducted from my biweekly salary? 

If you leave your government job before becoming eligible for retirement: 

  • If you have at least five years of creditable service, you can wait until you are at retirement age to apply for monthly retirement benefit payments. This is called a deferred retirement.   

If an employee who is not eligible for an immediate retirement benefit when they separate from federal employment chooses to receive a refund of their FERS retirement contributions, then they have the following options: 

According to OPM, you can roll over lump sum payments representing your retirement contributions, including voluntary contributions, and applicable interest.  An eligible payment can be paid either to you or directly to an individual retirement account or other employee sponsored plan. Your choice will affect the amount of taxes you owe. 

  • OPM is required to withhold federal income tax from taxable payments over $200 at the rate of 20%. However, you may choose to take all or part of these payments in a direct rollover to an individual retirement account or an employer-sponsored retirement plan that accepts rollovers. The taxable portion can be rolled over into the Thrift Saving Plan. If you make this election, we will not withhold the federal income tax from the taxable payments. 
  • You can open an individual retirement account to receive a direct rollover. You must contact the individual retirement account sponsor to find out how to have your payment made to your account. If you are unsure of how to invest your money, you may wish to temporarily establish an account to receive the payment. However, you may wish to consider whether you may move any or all the monies to another account later without penalties or limitations. 

If you choose to have the payment made to you and it is over $200, it is subject to the 20% Federal income tax withholding. The payment is taxed in the year in which it is received unless within 60 days after receiving it, you roll it over to an individual retirement account or retirement plan that accepts roll overs. You can roll over up to 100% of the eligible distribution, including the 20% withholding. To do so, you must replace the 20% withholding within the 60-day period. You will be taxed on any amount that you do not roll over. For example, if you roll over only 80% of the distribution, you will be taxed on the remaining 20%. 

You can find more information about the taxation of payments from qualified retirement plans from the following Internal Revenue Service publications: 

IRS Publication 575, "Pension and Annuity Income", 

IRS Publication 590-A, "Contributions to Individual Retirement Arrangements (IRAs)", 

IRS Publication 721, "Tax Guide to U.S. Civil Service Retirement System Payments", and 

Form 4972, "Tax on Lump Sum Distributions"

OPM will not withhold any amount for federal income tax if your total taxable lump sum is less than $200. We will request a rollover election when you are eligible for a payment of $200 or more.

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