In a previous article, we reviewed some of the results of recently released statistics from the Thrift Board on program participation and investment allocations applicable to the FERS civilian component. This article examines statistics on loans and withdrawals of the needy. Neither the CSRS participant nor her BRS participant are included. The numbers/percentages shown below are as of December 31, 2022.
Loans have been part of thrifty savings plans since their inception. TSP allows for his two types of loans: General Purpose and Residential. A general purpose loan has a repayment term of 1 to 5 years, and a home loan (for the purchase of a home) has a repayment term of 1 to 15 years. A participant can only have two loan balances at any given time. One general purpose and one residential, or two general purpose. Participants can only borrow their own contributions, capped at her $50,000.
Loan utilization has been declining over the last five years (2018-2022), dropping from 8.5% to 6.6% over this period. The most dramatic decline was in 2020, likely due to COVID-19 payments. It will be interesting to see if that percentage increases in the next few years.
The age group with the most loans is 40 to 50 years old. The least-used demographic is, as you might guess, 70+.
Hardship withdrawals are available for participants with financial need for the following reasons:
– Negative monthly cash flow.
– Unpaid medical expenses not covered by insurance.
– Unpaid personal injury losses not covered by insurance.or
– Unpaid legal costs associated with separating or divorcing your spouse.
Documentation may be required for difficult withdrawals and withdrawals are limited to the lesser of:
-Difficulties you indicated.or
– Your donation amount and earnings.
Withdrawals by the needy surged during the 2018-2019 government shutdown, and increased again in 2021 during the COVID-19 pandemic. The use of hardship withdrawals has nearly halved in 2022 (from 4% in 2021 to 2.1% in 2022). Similar to TSP loans, the most popular age group for difficult withdrawals is the age group He’s 40 to He’s 50. Similarly, the 70+ age group has the least access to difficult withdrawals. From 2018 to 2021, the second salary quintile used more hardship withdrawals than any other quintile, and the bottom quintile used more in 2022.
RMD chip. If you are old enough to receive the minimum required distribution from the IRA, do not wait until the last minute. An IRA administrator is often overwhelmed by his RMD demands from procrastinators. Depending on the administrator, he may not accept the RMD request even if the due date is approaching. Note that others may accept the order, but may not be able to fulfill the order by the due date. This is most common in his RMDS whose due date is his December 31st. Her first RMD is unlikely to have this problem and he should get it by April 1st the year after he reaches 73 years old.
Federal Career Expert President John Grove is an expert in the field of retirement and benefits for federal employees. This expertise stems from his 26-year federal career managing retirement programs at a large federal agency office of 3,500 employees.
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