By Mike Miles
Required minimum distribution
May 9th, 2013 | Uncategorized
Q. I have a 401(k), several CD IRAs and several mutual fund IRAs. I will turn 70 the end of November. Do I have to withdraw a minimum amount from each account, or can I withdraw the required minimum amount from one of the accounts as long as it totals the amount I must withdraw next year?
Tags: 401(k), IRA, Required Minimum Distribution
Deferring retirement and moving 401(k)
May 9th, 2013 | Uncategorized
Q. If I were to take the MRA+10 option and defer my retirement until I turn 62, can I still move my total thrift savings (401(k)) out of the thrift program?
A. Yes.
Tags: 401(k), deferred retirement, TSP
Rolling over post-tax 401(k) contributions into Roth TSP
May 6th, 2013 | Uncategorized
Q. I have a 401(k) plan from a previous job in the private sector that allowed yearly post-tax contributions after the pretax limit contributions had been reached. Can I roll over the post-tax contributions in my 401(k) to the Roth TSP?
A. Not unless the funds are held in a Roth 401(k) account.
Tags: 401(k), contributions, Roth TSP, taxes
Loan balance and G Fund
April 29th, 2013 | Uncategorized
Q. I am a 48-year-old GS-14/7 with about $240,000 in my Thrift Savings Plan (I have a little more in a prior 401(k), and my wife makes more than I do but does not have a 401(k) plan…I am willing to take reasonable risks).
I have contributed the maximum at 43 percent C, 22 percent S, 25 percent I and 10 percent F for several years and rebalanced each year. Indeed, I stubbornly left it like that during the crash but have recovered nicely.
I recently borrowed $30,000 (yes, I know, that is not the best course), at the G rate of 1.5 percent. It seems to me that that is akin to putting more than 10 percent of my savings in the very safe G Fund. So, while I left my existing F Fund balance alone, this “new” G money (interest on my loan repayments) plus the “bond bubble” threat convinced me to stop putting new money into either bond fund. I now contribute 48 percent C, 25 percent S and 27 percent I. (Yes, I tweaked the ratio a little due to lackluster I Fund performance and good S Fund performance).
Is it correct/smart to treat the interest I am paying myself as a sort of surrogate G Fund investment? Secondarily, are these ratios out of whack for a (moderately) aggressive portfolio?
A. Your loan balance and the G Fund differ in a big way: The G Fund guarantees the principal and the interest on your investment with them; you do not provide the same guarantee. Your asset allocation is “out of whack” in that it is risk-inefficient. For the same risk you are taking, you could achieve a higher expected rate of return by adding allocations to the remaining TSP funds.
Tags: 401(k), allocation, C Fund, F Fund, G fund, I Fund, loan repayment, S Fund, TSP
Penalty for transfer from former employer’s 401(k) to TSP
April 24th, 2013 | Uncategorized
Q. Your April 1 Money Matters article identifies the exception to the 10 percent penalty for early distributions for separation from federal service during or after the calendar year one reaches age 55. My question relates to funds transferred to my Thrift Savings Plan account from a former employer’s 401(k) plan. Does the exception apply to all funds contained in my TSP account, or just those funds contributed to the TSP in the normal course of my federal service employment — i.e., not counting funds transferred from a prior 401(k) account?
A. It applies to the contents of your TSP account, including transfers from other plans or accounts.
401(k) distributions at age 55
April 9th, 2013 | Uncategorized
Q. So if I follow all the rules related to my current Thrift Savings Plan account, and I begin making systematic withdrawals under the annuity factor method at age 55:
1. Can I contribute to my new employer’s 401(k) while drawing from my TSP? (I may want to take a downscaled job and subsidize the lower income with my TSP distributions.)
2. Are any Internal Revenue Service restrictions in place regarding my Roth IRA because I am taking distributions from my 401(k) at age 55?
A. Yes, you may contribute to a 401(k) while taking distributions from your TSP account, and no, there are no special rules limiting Roth IRA contributions because you are taking withdrawals from your TSP or 401(k) account. Only the usual income limits apply.
Tags: 401(k), age, annuity, contributions, distribution, IRS, Roth IRA, taxes, TSP
Military buyback with TSP funds?
April 9th, 2013 | Uncategorized
Q. What types of funds can be used to buy back military service time (nonqualified, qualified, Thrift Savings Plan account funds, IRA funds)?
A. Only after-tax money can be used, so you can’t use TSP, IRA or 401(k) money for this unless you withdraw it and pay the tax bill first.
Tags: 401(k), IRA, military buyback, taxes, TSP, withdrawal
Combat pay, TSP and 401(k)
April 2nd, 2013 | Uncategorized
Q. I am retiring from active duty in about six months. Almost one-third of my Thrift Savings Plan balance is from combat-zone tax-exempt contributions. I am looking to possibly roll my TSP into my next employer’s 401(k). What happens to the CZTE amount? How do I keep this amount tax exempt, and what are my options for this amount at retirement?
A. Given that the TSP is the best retirement investment environment you will find, I urge you to consider maintaining your TSP account and maximizing its use for as long as possible. Unless there are some extraordinary circumstances, you will probably be better off maintaining your TSP account and then transferring your 401(k) balance into it later, after you’ve left your private-sector job.
Tags: 401(k), retirement, rollover, tax-exempt status, TSP
Rolling over a Roth IRA
March 21st, 2013 | Uncategorized
Q. I have a non-401(k) Roth IRA. Why can’t I roll it over to a TSP Roth IRA? Both are after taxes.
A. The rules are the rules.
12 questions on VERA
March 19th, 2013 | Uncategorized
Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.
If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,
1. Would I begin my annuity immediately?
2. Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)
3. Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)
4. Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?
5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)
6. Could I begin receiving Social Security as early as age 62?
7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)
8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?
9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?
10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)
11. Would there be cost-of-living increases at any point for my annuity?
12. Is there a date during the year that maximizes the benefits of retirement?
Did I get this right, and are there any other things I should know before considering a VERA if it is offered?
A. Reg: 1. Yes.
2. Yes.
3. Yes. Half of your unused hours of sick leave would be added to any hours of service that were left over when your annuity was computed. Any additional months created would increase the amount of your annuity. Any unused annual leave would be paid to you in a lump sum at your current hourly rate.
4. Yes.
5. Yes. And those enrollments would continue until your death.
6. Yes.
Mike: 7. You will be subject to the early withdrawal penalty until you reach age 59½ unless you can qualify for one of the exceptions listed on Page 7 of the notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf. You may not contribute to the TSP after you retire, but you may transfer eligible balances into the TSP from other retirement accounts such as IRA, 401(k), 403(b), etc.
Tags: 401(k), 403(b), age, annual leave, annuity, catch-up contributions, cost-of-living adjustment, early withdrawal penalty, FERS, health insurance, income, IRA, IRS, life insurance, lump-sum, Medicare, Minimum Retirement Age, Postal Service, sick leave, Social Security, Special Retirement Supplement, TSP, VERA