Ask The Experts: Money Matters

By Mike Miles

Tax withholding

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Q. I’m 68 and still working, and I started drawing Social Security when I turned 66 two years ago. How do I calculate how much taxes will come out of my Social Security, TSP and FERS retirement checks?

A. You will find the rules for tax withholding from TSP distributions in the table on Page 3 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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Annual Leave payout

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Q. I am a federal employee and will retire Jan. 3. I will have about 400 hours of Annual Leave for a cash payout. Am I allowed to request that this monetary amount be directly rolled into an eligible 401K plan and not have any taxes taken out? If I take the cash payout, can I predetermine the tax percentage based on my calculations or does the government tax at the maximum rate?

A. You may not direct the payout into an IRA or 401k plan. Taxes will be withheld according to the W-4 you have on file with your payroll office.

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Revocable trust

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Q. I am federal employee and plan to retire in about six months or a year. I want to leave the money in TSP when I retire, but want to include TSP in a living revocable trust. I read online that it is not a good idea because the IRS considers that as a lump-sum transfer and I will be taxed at almost 35 percent. But when I consulted an estate-planning attorney, I was told that I can include TSP in the trust, and it does not make any difference in how I withdraw the money. I am confused. Please advise me if it is a good idea to include TSP in a revocable trust or not. Read the rest of this entry »

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Withdrawal eligibility

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Q. I was under FERS and I retired after 20 years. I was 55 then, and I am 57 now. When will I be able to withdraw my TSP?

A. Based on the facts you have provided, you may withdraw your funds at any time.

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TSP and health insurance

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Q. When I retire, I plan to roll over the balance of my TSP to my IRA in a brokerage account. Can I keep my FEHBP health insurance without having an annuity?

A. Your TSP account has nothing to do with your FEHBP coverage.

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TSP withdrawal

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Q. I am under the CSRS retirement system. I have 32 years of federal service. I am 56 and plan on retiring at 60. I contribute to the TSP, $17,500 per year and an additional $2,600 catch-up to the TSP per year. I am a GS-13/7. My high-3 would most likely be at this pay grade. How can I calculate how much my monthly annuity would be upon retirement so my financial adviser will have a better understanding of my situation upon retirement? I know about the ballpark estimates, but I would
like something a bit more concrete. When do I need to start withdrawing from my TSP fund upon retirement? At what age? Read the rest of this entry »

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Annuity eligibility

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Q. I was just hired by the VA (NTE only lasting 2 months, Excepted) at age 58. How long must I work before I am eligible for a monthly pension? How long must I work before I am eligible to keep retirement thrift plan? How long must I stay before I am eligible for retirement medical benefits?  I am assuming that I will find a permanent job but does this NTE time count toward something? Read the rest of this entry »

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TSP transfer

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Q. My husband and I are looking at investing into a new hotel being built. I have worked in the hotel industry for 15 years, and this is a great opportunity for us. He has been active duty in the Air Force since 2011 and has roughly $20,000 in his TSP. Can he transfer his TSP balance to a Self Direct IRA to invest the money into the hotel deal? Are there penalties involved? He would continue his normal contributions to the TSP account as we move forward, but we are interested in using the $20,000 to invest in the hotel.

A. He may if he’s aged 59-1/2 or older.

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TSP and Roth TSP

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Q. Upon retirement I want to transfer my Roth TSP out so I have more flexibility with taxes. Currently, I have all of my TSP money invested into the Roth TSP. Once retired, I want to transfer all but $1 to another firm into both a regular IRA rollover and Roth IRA rollover so that the two  types of TSP accounts are no longer co-mingled. I then want to transfer my regular IRA back into the TSP in order to keep the two types of accounts separate (regular TSP at the TSP and Roth TSP with outside brokerage firm in a Roth IRA rollover). Is this feasible? The TSP doesn’t allow you to have distributions from one or the other, only both. This way I could set up my distributions separately for tax advantages. Read the rest of this entry »

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Stock dividends

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Q. The stock funds (TSP) offered, Small Cap/Large Cap, invest in stocks. What happens to the dividends?

A. They are retained inside the funds and are reflected in the share prices.

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