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
CSRS annuity payments treated as rollover
May 9th, 2013 | Uncategorized
Q. Based on a reading of Internal Revenue Service Publication 721, it appears to say that since the CSRS and FERS retirement systems are considered “eligible retirement plans” you could roll over a distribution (including a regular annuity payment) into another IRA and defer the taxes, or into a Roth IRA and pay the taxes immediately. If this is the case, the normal IRS limitation on contributions to IRAs and Roth IRAs are bypassed. Am I reading this correctly?
A. From IRS Publication 721: “Distributions eligible for rollover treatment. If you receive a refund of your CSRS or FERS contributions when you leave government service, you can roll over any interest you receive on the contributions.You cannot roll over any part of your CSRS or FERS annuity payments.”
Tags: annuity, contributions, CSRS, distribution, FERS, IRA, IRS, retirement, rollover, Roth IRA, taxes
Penalties for leaving money in TSP
May 6th, 2013 | Uncategorized
Q. If I leave my money in the Thrift Savings Plan, will I be penalized? Is it correct to say that I have the option of rolling it into an IRA or withdrawing all of it or part of it?
A. You may leave your money in the TSP until the IRS minimum distribution requirements begin. The TSP does not penalize you for leaving your money there.
Tags: IRA, penalty, Required Minimum Distribution, rollover, TSP
Divorce and TSP
April 29th, 2013 | Uncategorized
Q. I am about to divorce my husband, who works for the Federal Aviation Administration.
1. Can I keep his health insurance as an individual? Does this cost anything to him? How much will it cost me?
2. How can I be eligible for his life insurance after divorce?
3. Which is more beneficial: Getting a survivor benefit or getting a higher pension?
4. When can he start taking money from his Thrift Savings Plan?
A. You can’t withdraw money from his TSP account. Your divorce settlement will govern how the TSP is divided and distributed and you’ll likely wind up with your share in an IRA in your name. The usual rules for distributions will then apply.
Tags: divorce, health insurance, IRA, life insurance, survivor benefits, TSP, withdrawal
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
TSP vs. IRA
April 5th, 2013 | Uncategorized
Q. Should I keep my money in the Thrift Savings Plan after I retire or put it in an IRA? What would be best to make the most interest?
A. Stick with the TSP. You can’t beat the G Fund for risk-free interest.
VCP conversion to Roth
March 21st, 2013 | Uncategorized
Q. I am 66 years old and plan to retire in 2014, at which time I would transfer (convert) my Voluntary Contributions Program monies directly into a newly created Roth IRA. However, I have an existing (non-TSP) Traditional (substantial) IRA (never taxed), and know the Internal Revenue Service will aggregate my Traditional IRA balance for purposes of determining the taxability of this VCP-to-Roth conversion.
If, prior to retirement, I (in 2013) transfer (direct rollover) my Traditional IRA into my existing Thrift Savings Plan account, will those monies now be considered 401(a), and therefore, making my subsequent VCP-to-Roth conversion occur with few tax implications?
A. As I understand the rules, your TSP balance will not be subject to aggregation for the purpose of determining the taxability of your VCP-to-Roth IRA conversion, but you should consult a CPA before going down that path. You may also want to fill in a pro-forma IRS Form 8606 to see how it will look. This is the form used to calculate your tax liability on conversions. Notice that it does not mention an employer-sponsored plan like the TSP anywhere.
Tags: age, IRA, IRS, retirement, rollover, Roth IRA, taxes, transfer, voluntary contributions program
Rolling TSP into IRA
March 20th, 2013 | Uncategorized
Q. Can you elaborate more on the “Ask the Experts” answer at http://blogs.federaltimes.com/federal-money/2011/02/16/rolling-a-portion-of-tsp-balance-into-self-directed-ira/. The answer seems to imply that under some circumstances, Thrift Savings Plan funds can be rolled over into self-directed IRAs. Can you explain the circumstances under which it’s legal, and can you provide references? I’d like to create a self-directed IRA for my husband, who is 45 years old and no longer in federal service, and then use the funds to purchase a rental property, with the monthly rents going directly into the IRA.
A. Rollovers are allowed for TSP participants who are no longer federal employees or who are over age 59½. He’ll need to fill out the appropriate TSP withdrawal request form (TSP-70 for a full withdrawal or TSP-77 for a partial withdrawal) and direct the distribution to the IRA custodian of his choice.
Tags: age, distribution, IRA, rollover, TSP, withdrawal
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
Rollover mistake
March 11th, 2013 | Uncategorized
Q. I’m a recent federal retiree and was attempting to rollover my Thrift Savings Plan account to an IRA. I filled out the proper forms and had the financial institution where I’m rolling over the funds complete its section (Page 4), as well. I faxed the TSP withdrawal form as instructed. After a couple of weeks, I received a check (minus federal taxes) in the mail. I called the TSP hotline and they said that they received all of the pages of my form except for Page 4. They said that Page 4 was missing but the pages following Page 4 were received. I’ve asked repeatedly on how we can fix this problem but haven’t gotten a good answer yet. It’s been two weeks now and I haven’t cashed the check yet. I would like to give it back and have the full amount rolled over to the IRA. Is there someone I can talk to other than the people in the call center? What are my options?
A. You should engage a CPA as quickly as possible for advice on how to handle this. If you have a check in your possession, payable to you, you have constructive receipt of the money and the clock is ticking for the rollover. Not cashing the check will not prevent the money from being considered a taxable distribution if the rollover time limit expires.
Tags: IRA, rollover, taxable distribution, TSP, withdrawal