Posted on Saturday, 13th June 2020 by

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The CARES Act offers temporary loan and withdrawal options for TSP participants affected by COVID-19. The dramatic stock market sell-off this past March and subsequent correction last week reduced portfolio values dramatically for many. Lower account balances for all but the bond funds make the decision to take out loans or elect a withdrawal difficult. However, for those negatively impacted these options are a needed lifeline to deal with the pandemic and the financial hardship that it has imposed on many.

The loan options described below will be available no later than June 22, 2020, and this withdrawal option will be available in mid-July 2020. Both the loan and withdrawal options are available only if you can certify that you meet one or more of the following criteria:

  • You have been diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention.
  • Your spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) has been diagnosed with such virus or disease by such a test.
  • You are experiencing adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary’s delegate).

Increased maximum loan amount

The maximum loan amount is increased from $50,000 to $100,000, and the portion of your available balance you can borrow is raised from 50% to 100%. The deadline for applying for a loan with this increased maximum will be in September 2020. The TSP will announce the exact cutoff date soon.

Temporary suspension of loan payments

TSP participants may suspend their obligation to make payments on their TSP loan or loans for the rest of calendar year 2020. This applies to existing loans and loans taken in the remainder of 2020. A new form will be available for you to request this suspension.

Request a Federal Retirement Report™ to review projected annuity payments,
income verses expenses, FEGLI, and TSP projections.

CARES Act Withdrawal

You may make a one-time withdrawal of up to $100,000 from a civilian or uniformed services account. For those still in federal service, the usual requirements that you be at least 59 ½ years old or certify that you meet specific financial hardship criteria are waived. Though you may request that we withhold money from your withdrawal for federal income tax, we will not automatically do that. This withdrawal will be eligible for the favorable tax treatment described here, with all of the same options and restrictions. The deadline for applying for this withdrawal will be in December 2020. The TSP will announce the exact cutoff date soon.

Life Cycle Fund Changes

Starting this July more TSP lifecycle Funds will be available — (June 1, 2020) Starting July 1, 2020, we now have ten Lifecycle (L) Funds to choose from instead of the five currently available. They’ve adding the additional L Funds so that the target dates will be separated by only five years instead of ten, allowing you to more precisely target the time when you think you’ll need your money. Six more L Funds will be added, and the L 2020 Fund, having reached its target date, will be rolled into the L Income Fund. Funds List

  • L Income Fund − Consider investing in this fund if:
    • You are already withdrawing from your TSP account or
    • You were born before 1958
  • L 2025 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2021–2027 or
    • You were born between 1958–1964
  • L 2030 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2028–2032 or
    • You were born between 1965–1969
  • L 2035 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2033–2037 or
    • You were born between 1970–1974
  • L 2040 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2038–2042 or
    • You were born between 1975–1979
  • L 2045 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2043–2047 or
    • You were born between 1980–1984
  • L 2050 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2048–2052 or
    • You were born between 1985–1989
  • L 2055 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2053–2057 or
    • You were born between 1990–1994
  • L 2060 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account between 2058–2062 or
    • You were born between 1995–1999
  • L 2065 Fund − Consider investing in this fund if:
    • You plan to begin withdrawing from your TSP account after 2062 or
    • You were born after 1999

Other TSP changes include a deferral of mandatory Required Minimum Distributions (RMDs) for 2020 due to the pandemic.

Helpful Retirement Planning Tools

Request a Federal Retirement Report™ to review projected annuity payments,
income verses expenses, FEGLI, and TSP projections.

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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