Leaving the Military Soon? Don't Forget the TSP.

By Miriam Darden Settles, CFP®, Communications, Federal Retirement Thrift Investment Board

If you have plans to leave the military soon, you probably already have a long to-do list. As far as managing your Thrift Savings Plan (TSP) account goes, the TSP makes it easy for you.

First, if you have an outstanding TSP loan, you should consider paying it off before you leave the military. The Internal Revenue Service considers the amount of an unpaid loan balance to be taxable income when you separate. A 10% early withdrawal penalty tax may also apply if you separate before the year you reach age 55. All you need to do is complete a Loan Payment Coupon (available at the TSP website, www.tsp.gov , or from the ThriftLine) and send it with your payment to the TSP. Once you've addressed any outstanding loans, you can consider what you want to do with your TSP account.

You are welcome to stay in the TSP.

If your account balance is $200 or more, you can leave your TSP account right where it is. You can also simplify your financial life by consolidating your retirement accounts. So if you have another eligible employer plan or a traditional IRA, you can transfer it into your TSP account. This way, you'll continue to enjoy the TSP's low administrative expenses and you'll still be able to change your investment mix by making interfund transfers. Also, if you leave your account with the TSP, you won't have to start withdrawing your money until you turn 70½.

You can transfer your account to an IRA or an eligible employer plan.

After your military career, maybe you'll go to work for a civilian employer that offers a 401(k) or similar retirement plan. Or you may decide to open an IRA if you don't already have one. It's possible to transfer all or part of your TSP account to your new plan or IRA. Keep in mind that your new plan's expenses might be higher than the TSP's. It's worth checking because every dollar that a retirement plan collects from you in the form of expenses is a dollar less that goes to work for you.

You can withdraw the funds from your TSP account.

If you are ready to start withdrawing your TSP account, you have many options.

You can take a partial withdrawal if you are eligible. Refer to Form TSP-U-77, Request for Partial Withdrawal When Separated, for more details.

OR

You can choose one of the full withdrawal options:

• Single payment
• Monthly payments of a fixed amount or based on your life expectancy
• Life annuity
• Any combination of the above

Use Form TSP-U-70, Request for Full Withdrawal, to choose any of the above options. Be aware that when choosing withdrawal options, there are tax considerations. For example, you will owe taxes on any payment you receive from your account, including a mandatory 20 percent Federal tax withholding. However, if all of your contributions were tax-exempt, you will only owe taxes on the accumulated earnings. Note that in certain circumstances, you may also be subject to a 10 percent early withdrawal penalty. You can find all of the tax information you need in the tax notice Important Tax Information About Payments from Your TSP Account.

So if you're leaving the military, keep the following TSP checklist in mind:

• If you have any TSP loans, pay them off right away.
• Talk with your service transition assistance coordinator to learn basic information regarding your TSP options.
• Read the booklet Withdrawing Your TSP Account After Leaving Federal Service.
• Read the tax notice Important Tax Information About Payments from Your TSP Account.
• Make sure the TSP has your current address at all times. Once you have left the military, you can use the TSP website to keep it updated.
• Call the ThriftLine at 1-877-968-3778 whenever you have questions.

The TSP is here to help and we thank you for your military service.

Next month: How Do I Move the Money Around in My TSP Account?

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Save Money, Save the Planet

By Ian Burgess, Command Financial Specialist

NBC's "Green Week" programming takes me back to early-90's Saturday-morning cartoons. My earliest memory of the "Green" movement was almost two decades ago when Tweety's Global Patrol taught me how to "Reduce, Reuse, and Recycle." My favorite part was how Tweety's fighter-pilot maneuvering put that dastardly cat out in the trash, but not before teaching us all a lesson on the three big R's. I believe that simple environmental public service announcements like Tweety's Global Patrol and Shamu's "Don't Mess with Texas" made a significant impact on my generation's green education.

As children, we had no problem listening to cartoon characters but as adults, we are easily convinced. So here's another perspective that I know all adults understand: it will save you money. Saving money is a universal desire, irrespective of politics or personal beliefs. These simple environmental tips will not only save you money, they'll also save the planet.

REDUCE
This tenet is the easiest to understand and implement. When you reduce your consumption of stuff like water, electricity, or gasoline, your lower utility bills become instant savings in your bank account. But that's not all; there's another dimension to this principle. Reduced demand for these commodities can actually bring down the unit price for all consumers. The following real example will illustrate how we can all work together to bring down utility prices.

My water bill is roughly $30, $5 for consumption and $25 for meter reading. If I use twice as much water next month, my consumption price will be $10 for a total of $35. A neighboring town recently switched to a purely consumption based water billing system which directly tied the amount a consumer paid to the amount they used. The city's total water consumption dropped by 30% in the first year.

The lower demand resulted in lower operation costs and increased the capacity of the current infrastructure. Your decreased usage will save you money and the decreased demand will bring down prices for everyone in the long run. And if you think supply and demand has no affect on prices, let me remind you about Tickle Me Elmo and Nintendo Wii.

REUSE
This tenet calls for individual creativity. Ask your grandparents who lived through the Great Depression. Shopping at your local thrift store can be a triple-win. Not only are you saving money and the landfills, most thrift stores put the money into local charities. Donating stuff to the thrift store keeps your trashcan empty and you'll get a good tax deduction too. Even clothes that you think nobody would want can be made into rags or quilts. You can also reuse everyday household items like plastic water bottles. Refilling each bottle once can save you half the money you spend on bottled water and creates half as much trash. That's a big deal when you consider the energy used to produce and ship bottled water. What do you do with grocery bags? Plastic bags become trash bags and they come in handy when walking the dog. Paper bags make great textbook covers and you can use newspaper as gift-wrap. The point is that stuff doesn't have to be trash; it only becomes trash when you throw away.

RECYCLE
Recycling is not just for hippies, it's for everyone who likes to save money; hey that's you! Here's an example. Budweiser cans are made of 100% recycled aluminum. If we had not been recycling aluminum for the last 50 years, a can of beer would cost about 5 cents more, which can add up quickly considering how many cases you and your buddies put down at last weekend's shindig.

That principle can be applied to oil as well, which is used to make plastic and rubber. Only 22% of the 116 Billion pounds of plastic produced last year was recycled. At current oil prices, it is cheaper for plastic producers to use recycled plastic than to buy crude oil but there isn't enough recycled plastic to buy. That is one reason why a lot of packaged food prices are going up.

Newspapers are cheaper today because paper is the most recycled product at about 50% of what's produced each year. While that sounds like good news, there is still 1 billion trees worth of paper thrown away every year. Recycling 100% of our average 680 pounds of paper products per year could reduce prices by 64% once you factor in the energy savings from cutting down, shipping, and pulping trees.

But here's the bottom line. In my town, there are 4 choices of trash can sizes with the prices ranging from $29 to $89. The recycling can is free. By simply using a smaller trashcan, each house hold can save $60 a month. Now that's real money in your pocket.

As Tweety reminded us at the end of the retro PSA, "We can make a difference."

For a little nostalgia, search for Tweety's Global Patrol on Google or YouTube.

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