By Mike Miles
TSP additions
March 16th, 2010 | Uncategorized
Q. Can I add lump sums of money to the TSP from any other source except my paycheck? If so, what are those sources? I am a current federal career employee.
A. You may transfer balances from certain other retirement plans (like 401(k) plans) and traditional IRA accounts as long as they contain only pretax money.
Tags: thrift savings plan, TSP
CSRS annuity rollover
March 16th, 2010 | Uncategorized
Q. I took an early retirement and receive a monthly annuity check from the CSRS. I am currently 54 years old. Can I roll over the taxable amount of the annuity into an IRA to avoid paying the tax on this money until a later year?
A. No.
Second house purchase
March 16th, 2010 | Uncategorized
Q. I am a 61-year-old CSRS retiree. I have approximately $120,000 in the TSP. I do not plan on touching the money but leaving it as an inheritance to my children. Recently, however, with housing prices being low, I have thought about cashing it out and buying a second home in Florida ,which of course the children would also inherit. This would give me a second home with no mortgage. Would the tax on the withdrawal make this a foolish move?
A. It’s not foolish to use your money to live your life the way you want. The taxes will have to be paid, sooner or later, in any case. Before you do it, though, you should determine whether it might be to your advantage, tax-wise, to spread the tax burden over multiple years by mortgaging the property and then paying it off using a partial and final lump-sum withdrawal or by taking monthly withdrawals from your TSP account, rather than taking it all in one lump sum.
Tags: CSRS, retirement
TSP funds
March 16th, 2010 | Uncategorized
Q. I am 61 years old with 21 years of FERS service. I plan to work a few more years. I moved money into my Thrift Savings Account a few months ago. I took money from my C Fund and added to the G Fund. I moved only the amount due to pay my mortgage off. Due to my age, was this a wise move and how safe is the G Fund considering the government’s debt? I have 40 percent in the G Fund, 30 percent C Fund and 30 percent in the S Fund. Would you recommend that I leave my money distributed as is?
A. You’re asking for specific investment advice — what’s the best way to achieve your particular goals considering your circumstances and preferences — which I can’t possibly provide responsibly through this forum. As for the G Fund, anything is possible, but I consider the G Fund to be a relatively safe investment with an unmatched risk-adjusted rate of return.
Tags: thrift savings plan, TSP
TSP conversion to Roth
March 11th, 2010 | Uncategorized
Q. Please advise … can I convert my existing TSP account to a Roth IRA? I would love to start a Roth but our family income is over the threshold. The rules for 2010 seem like a perfect opportunity to make it happen. I just don’t know if the TSP is one of the retirement accounts that can be converted.
A. Yes, you may, but I’d advise against it in most cases. You should consider what must happen for the Roth IRA to overcome the burden of higher costs and/or risk, compared to the TSP.
Tags: Roth IRA, thrift savings plan, TSP
Federal Funds rate and the F Fund
March 10th, 2010 | Uncategorized
Q. The Federal Reserve Bank has indicated it will begin increasing the Federal Funds Rate this year. How much of an impact (decrease in value) will this have on the F Fund (U.S. bonds)?
A. It’s impossible to say exactly, since the F Fund is composed a variety of types of bonds. In general, you should expect rising interest rates to drive down the market value of bonds, particularly treasury debt — but reasonable expectations are not always fulfilled.
Tags: funds
Converting Traditional IRA to TSP and Roth
March 10th, 2010 | Uncategorized
Q. If I have a traditional IRA worth $100,000 with a basis (post-tax contributions) of $20,000, can I roll over $80,000 to TSP and the other $20,000 convert to a Roth? Would these two actions result in a tax-free transaction?
A. No. Any distributions from your IRA, whether rolled over, or not, are considered to consist of both basis and earnings.
Tags: IRA, Roth IRA, thrift savings plan, TSP
Age-based withdrawals
March 10th, 2010 | Uncategorized
Q. I am 60 years old. I want to make an age-based withdrawal. However, I am paying back a loan made four years ago. The TSP Web site says I cannot make an a withdrawal if I have a loan application pending. Since my loan has been ongoing for four years, the load application is “NOT PENDING. May I still make an age-based withdrawal with an active loan?
A. Having a loan outstanding does not prevent you from taking an in-service withdrawal.
Tags: withdrawal, withdrawals
Contributing to the TSP and another 401(k)
March 9th, 2010 | Uncategorized
Q. I am a federal employee and contributing the maximum of $16,500 to the TSP. I also have a sub-chapter s-corporation and earn outside employment income. Can I open a 401(k) under the corporation and make additional pretax contributions to this account?
A. No. The limit applies in the aggregate.
Tags: 401(k), thrift savings plan, TSP
72T and TSP
March 9th, 2010 | Uncategorized
Q. I plan to retire at the age of 53 with 22 years under law enforcement with the Bureau of Prisons. Can I have my 72T Substantially Equal Periodic Payments come from TSP or do I have to transfer to a financial planning firm such as Edward Jones?
A. The payments can come from your TSP, but will have to be set up as monthly payments.
Tags: SEPP, thrift savings plan, TSP