By Mike Miles
Early withdrawal penalty
February 27th, 2013 | Uncategorized
Q. I am retiring soon (four months) under MRA+10. Will I be penalized for a Thrift Savings Plan withdrawal at my retirement? I will be 56 at the time of retirement. I am moving from my present location to another state and plan to use the better part of it as a down payment on a home.
A. As long as you retire during or after the calendar year in which you reach age 55, your TSP withdrawal will not be subject to the early withdrawal penalty.
TSP, IRA and Roth contribution limits
February 27th, 2013 | Uncategorized
Q. I am over 50, my wife (unemployed) is under 49. In 2013, if I contribute the maximum amount (including catch-up) of $23,000 to my Roth TSP and traditional Thrift Savings Plan, can I also contribute the maximum of $6,000 to a Roth IRA or traditional IRA for a total contribution of $29,000? Can I also contribute the maximum of $5,000 for my wife into a Roth IRA or traditional IRA for a total contribution of $34,000, assuming that I fall within the adjusted gross income limits as addressed by the Internal Revenue Service? If there are limitations on contributing to a Roth IRA or traditional IRA when active in the TSP, what are they?
A. Subject to the income limits outlined in IRS Publication 590, you may contribute to the TSP and an IRA or Roth IRA.
Tags: catch-up contributions, income, IRA, IRS, maximum contribution, Roth IRA, Roth TSP, spouse benefits, TSP
TSP annuity and the Social Security earnings limit
February 27th, 2013 | Uncategorized
Q. I will have about $1.5 million in my Thrift Savings Plan when I retire. I am planning on getting an annuity with those funds. Because it is part of my retirement funding, will this be counted against me with respect to the Social Security earnings limits? In other words, will I have to pay additional taxes on what I have earned in my retirement account because my income will be in excess of the Social Security earnings limits?
A. The income will not be counted as earned income for means testing but will be counted as income for determining the taxability of your Social Security benefits.
Tags: annuity, income, retirement, Social Security, taxes, TSP
Rollover to avoid taxes
February 27th, 2013 | Uncategorized
Q. I would like to roll over the money from one retirement account (my Thrift Savings Plan) to my CSRS retirement account, so as to avoid paying tax. How am I supposed to be able to do this since neither the TSP nor the Office of Personnel Management nor the Internal Revenue Service can give me an answer on if it is possible and if so, how? I would be paying service time from Sept. 10, 1973, to May 30, 1983, and from Aug. 25, 1997, to June 19, 1999.
A. You’re not supposed to be able to do it because it isn’t allowed.
VCP rollover
February 27th, 2013 | Uncategorized
Q. I am 73, retiring March 1. Is it possible to transfer or rollover my entire Voluntary Contributions Program balance into my Thrift Savings Plan account at my age?
A. Only the untaxed earnings may be rolled over into your TSP account. The contributions may be rolled over to a Roth IRA account.
Tags: age, contributions, rollover, Roth IRA, taxes, TSP, voluntary contributions program
Early withdrawal penalty?
February 21st, 2013 | Uncategorized
Q. I am retiring in six months with 30 years under FERS at age 57 (my minimum retirement age). I am planning on using my Thrift Savings Plan to buy a house with equal payments for five years. The payments will start one or two months after retirement. Will I be penalized for early withdrawal because I am not 59½ ? I was under the impression that TSP was considered one-third of my retirement, and that at time of retirement, I would be eligible to withdraw. Is this correct?
A. Since you are retiring during or after the calendar year in which you reach age 55, you will not be penalized for withdrawing from your TSP account before age 59½.
Tags: early withdrawal penalty, FERS, Minimum Retirement Age, TSP
Transfer to G Fund because of sequestration?
February 21st, 2013 | Uncategorized
Q. I am 37 years old, invested 100 percent in L2030. I have 25 years left to work, and I’m happy with 5 percent growth. I’m afraid of sequestration effects, so I’m planning to move 100 percent into G fund this week. I will move it back into L2030 after sequestration, when it posts three months of positive share price gain. Good plan or bad?
A. Bad.
Tags: age, fund transfers, G fund, investment, L Fund
401(k) beneficiary and taxes
February 20th, 2013 | Uncategorized
Q. My husband has a substantial sum in his private company’s 401(k). I am the beneficiary on this account. If he dies and the money goes to me, may I put that money into my Thrift Savings Program, since that money is all pretax?
A. Good question! If it winds up in a 401(k) or IRA solely in your name (not in a beneficiary account), it is eligible to be moved into your TSP account.
TSP loan and taxes
February 20th, 2013 | Uncategorized
Q. I am an air traffic controller who is retiring in two months at age 48. I have an outstanding Thrift Savings Plan loan for about $9,000. What happens if I don’t pay this off before I retire? Do I pay the 10 percent penalty, along with it being shown as income? Does this affect my monthly withdrawal from TSP using the 72(t) rule? Also, can I take a one-time partial lump-sum withdrawal and pay the 10 percent penalty without it affecting my monthly withdrawal?
A. If you don’t repay the loan within the grace period after you retire, it will be declared a taxable distribution and you will owe penalty and taxes on the income. This does not affect your ability to initiate monthly distribution payments to satisfy the 72(t) rules on the remaining balance. Taking a partial withdrawal does not impair your ability to take automatic monthly distributions, which are considered a form of full withdrawal.
Tags: 72(t), loan repayment, lump-sum, monthly, one-time partial, penalty, retirement, taxable distribution, taxes, TSP, withdrawal
Drawing from Social Security and TSP
February 20th, 2013 | Uncategorized
Q. I am 65 years old and will collect my first Social Security retirement check this month. I have been employed by the federal government for the past nine years; therefore, I have been enrolled in the Thrift Savings Program. If I retired today, my TSP benefit would be approximately $400 a month. Will my Social Security or TSP benefit be penalized because I am drawing benefits from both accounts?
A. It is possible that the taxes you owe on your SS benefits could affected by your annual income, including TSP distributions. See www.irs.gov/uac/Are-Your-Social-Security-Benefits-Taxable%3F for more info.
Tags: distribution, IRS, penalty, retirement, Social Security, taxes, TSP