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TSP CARES ACT & Life Cycle Fund Changes

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The CARES Act [2] 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:

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 [3]™ 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

Other TSP changes include a deferral of mandatory Required Minimum Distributions [4] (RMDs) for 2020 due to the pandemic.

Helpful Retirement Planning Tools

Request a Federal Retirement Report [3]™ 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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