Ask The Experts: Money Matters

By Mike Miles

Moving money into TSP

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Q. I understand I am allowed to roll or transfer other 401′s or Roth IRA’s into TSP, but can I just invest money saved in traditional savings accounts into my TSP?

A. While you may transfer certain qualified tax-deferred retirement assets into the TSP, Roth IRA and taxable savings are not eligible.

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TSP annuity

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Q. My question has to do with choosing to withdraw my TSP account upon retirement. I understand I can leave my balance with the government and either choose equal payments for my expected lifespan or have the government purchase an annuity on my behalf. What I do not understand is the difference between choosing equal payments for the rest of my life and purchasing an annuity solely for myself? What are the pros and cons for each? I also don’t understand why I am also given a choice to choose a survivor benefit with my wife as the beneficiary should I decide on the annuity available through the government. If I die before my wife, isn’t she entitled to my TSP balance regardless if I choose the equal monthly payout or the annuity? Since she is the beneficiary of my TSP remaining balance, why should I even consider purchasing an annuity with a survivor benefit when this will have the effect of reducing my monthly pay? She will get the remaining TSP balance should I die anyway, won’t she? I also would like to know  if I choose either option for withdrawing my TSP retirement funds, do I retain control of the balance? Can I still move the money around from the C, S, and I funds in order to sustain the longevity of my retirement account? Read the rest of this entry »

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TSP funds

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Q. I started working for the government about 2-1/2 years ago. I am 56 and plan to retire in 10 years. I am contributing 15 percent of my  pay to the TSP G fund. I want to earn more than this fund is paying. What are your recommendations on which fund I should contributing to?

A. If you don’t know what else to do, then about the best thing I can suggest is that you use the L Fund that most closely corresponds to your life expectancy. You won’t know how much spending this will safely support, but at least you’ll know that your account is risk-efficient.

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Investment allocation

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Q. I am 25 and I am almost at the four-year service mark. I have been contributing since I started working for the federal government as a GS-07 at 5 percent. I am a GS-12 and started contributing 15 percent about five months ago (10 percent ROTH). My current allocation is 50 percent in C and 50 percent in S. I am trying to diversify my allocations a little better. Please help me with some feedback as to which other categories I should looking. Read the rest of this entry »

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Roll IRA to TSP?

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Q. I am a 55-year-old Postal employee planning to retire sometime in the next year under CSRS. Many years ago, I purchased a $2,000 Vanguard IRA that has grown to more than $40,000. I also have a separate similarly valued Roth IRA. I know that I can begin penalty-free withdrawals from TSP after separation, but can I roll my Vanguard IRA into TSP?  I also know that I cannot roll my Roth into TSP. My desire is to have the money accessible before 59-1/2 and to avoid having three pots to withdraw MRDs when I’m 70-1/2. Any suggestions?

A. You may transfer the IRA money into the TSP any time, as long as it contains no after-tax contributions.

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Late start to TSP

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Q. I am 65 years old.  I have been employed in the federal government for nine years. At this late stage and age, should I join TSP.

A. If you’d like to save money for your use later in retirement, yes.

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USAA Roth and TSP contributions

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Q. I took my tax info to a professional to have them done this year. I’ve maxed out my Roth IRA with USAA. I’ve also contributed about $2500 to a traditional TSP as a uniformed service member. I’m being told I’ll be penalized for my contributions to my Roth account since I have an employer-based retirement plan. Is this accurate? Can I only contribute a total of $5500 for both accounts? I’ve always been told to contribute to both.

A. The TSP contribution limit is fixed and not contingent on any other factor. Your eligibility to contribute to a Roth IRA might be limited if your income is sufficient. In the future, I suggest that you max out your TSP contributions before you save to a Roth IRA, and then check with your tax accountant before you attempt to make any IRA contributions since your eligibility depends upon your tax return for the year. See IRA Publication 590 for the limits on IRA contributions.

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Combining TSP accounts

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Q. I was enlisted in the Marine Corps from 2004 to 2008 and have been a full-time employee at the Social Security Administration since March 2012.

So, I have a uniformed services Thrift Savings Plan account and a civilian TSP account (using pretax and Roth contributions).

Nothing has been contributed to the uniformed services account since I left the Marines in 2008, so I asked someone in human resources here if I could combine the accounts. I was initially told this wasn’t possible, but after my own research, I found Form TSP-65 – Request To Combine Civilian and Uniformed Services TSP Accounts.

After I showed this to the HR office, I was told it wouldn’t be beneficial to combine the accounts because I would take a tax hit on the tax-free money that I made overseas while deployed to combat areas. This explanation doesn’t make too much sense to me because my TSP contributions were pretax contributions anyway (there was no Roth option at the time). Also, I don’t trust the info from my HR office after they were wrong about the ability to combine accounts.

Should I combine the accounts or leave them separate?

A. If you contributed tax-free combat pay to the TSP, you should keep the military account to preserve your ability to withdraw that money later without having to pay tax on it. Combat pay contributions are not the same as Roth contributions, and the two are not interchangeable.

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Early withdrawal penalty

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Q. I retired from civil service in January 2012 with 25 years contributing to CSRS and FERS. I will be 59½ in April. I plan to make a partial withdrawal and have the balance as monthly payments when I turn 60. Will I incur an additional 10 percent early withdrawal penalty before age 59½ since I retired or do I need to wait until 59½? Do I need to wait until 60 to begin receiving monthly payments, or can that start any time?

A. Since you retired after the calendar year in which you reached age 55, your Thrift Savings Plan withdrawals will not be subject to the early withdrawal penalty. You may withdraw your money at any time.

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TSP agency contributions

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Q. I was hired into federal service Sept. 28, 1992. At this point, shouldn’t the government have started contributing to a Thrift Savings Plan account in my name 1 percent of my salary automatically? Contributions didn’t begin until I manually enrolled in TSP a year later.

This seems to be the bit from the TSP website that applies to me:

“If you are a FERS participant and were hired before Aug. 1, 2010:

* The TSP would have begun receiving automatic contributions equal to 1% of your pay from your agency — beginning with your first pay period. If you contribute your own money, your agency will send matching contributions to the TSP (on up to 5% of your contributions per pay period).”

Did someone screw up? Is there any recourse to get those initial contributions plus interest? Or have I misread everything?

A. Check with your agency. There have been varying waiting periods for TSP agency contributions in the past.

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