Ask The Experts: Money Matters

By Mike Miles

Finding an advisor

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Q. My husband and I are 51. We will retire in about 10 years. How do we find the right financial advisor that will help us understand what we need for retirement, and  what we need to do if we won’t have enough to meet our needs? Read the rest of this entry »

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TSP investment

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Q. My daughter is 20 and just entered the military, hopefully to make a career of it. She is contributing 10 percent to her traditional TSP and $25 per month to her Roth TSP. Her traditional TSP is fully invested in the G Fund (this was automatic and she didn’t know enough to change anything). Wouldn’t it be better for her to put the maximum amount she can afford into the Roth TSP before putting anything into the traditional? She will probably be making quite a bit more money when she retires than what she makes now. If not, what is your suggestion? If she keeps the traditional contribution, should she redistribute her fund percentages or just switch to one of the L funds that are managed for her? Read the rest of this entry »

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IRA rollover

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Q. I retired in December at age 60 under FERS and my TSP is in the L fund because I plan to start drawing down to supplement my pension. My plan is to withdraw 4 percent per year based on a rate of return of 4.46 percent.
The amount of my account is $249,972, which has not been touched yet. I’ve sought the advice of several financial planners who have consistently advised me to roll over my account into a self-directed IRA due to the risk of interest/inflation’s effect on the bonds in the L portfolio, as well as the limitations of the diversification of all the TSP funds themselves. I’ve used the TSP calculator many times using different scenarios with favorable results, but I’m no financial whiz and not confident in my results. Should I move my savings into an IRA or is it better to stay where I am? These financial planners often cite the advantages of rollovers that include accessibility, more control, financial support and more diversification. I just want to be able to supplement my income without too much exposure, which is why I chose the L Fund. What are your thoughts on this? Read the rest of this entry »

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Beneficiary IRA account

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Q. My mother recently passed away and left me $30,000 from her traditional IRA. Can I transfer this to my TSP? Would there be any penalties or tax hits?

A. Special distributions rules apply to a Beneficiary IRA account, and it is not eligible to be transferred into your TSP account.

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TSP contribution

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Q. Since catch-up contributions must be renewed each year, is it possible to make non-payroll cash contributions? Or are all non-IRA rollovers required to be payroll contributions?

A. You may not make direct contributions to your TSP account. The only way in is through payroll deferral or transfer from an eligible retirement account.

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What’s considered earned income

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Q. Can you please provide a citation to your assertion that an annual leave payout is not considered earned income and cannot serve as the basis for IRA contributions?

A. See the sections on what is, and what is not, compensation on Page 8 of IRS Publication 590. I believe it is considered deferred compensation, but in the end, how you should proceed is a question for your tax preparer.

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Withdrawals and tranfers

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Q. I plan on retiring with 31 years of service at age 57. I have both the Regular TSP and the Roth TSP. I plan to withdraw my Thrift Savings Plan in a single payment. Can I transfer 100 percent of the Regular TSP to a Traditional IRA, but take the Roth TSP funds as a direct withdrawal without penalty?

A. I believe so, as long as you have held the Roth account for at least five years. You should consult a tax adviser for specific advice before you proceed.

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IRA requirements

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Q. I have three IRA accounts and I turned 70 in March. Do I combine the three to figure the required withdrawal? What would the tax  be if I do a lump-sum withdrawal from all three?

A. You must obey the aggregations rules for calculating your IRA RMD spelled out in IRS Publication 590. The taxable portion of each withdrawal will be added to your tax return as ordinary income for the year, where the tax you owe on the withdrawal will be calculated. Whoever prepares your tax return for the year of the withdrawal is responsible for making sure that it is done right.

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TSP to IRA

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Q. Can I take my money out of the TSP and pay the penalty? Is there any way to get all my money out without having to retire or quit? If so, can I then move it into another self-directed IRA?

A. The only ways to remove money from your TSP account before reaching age 59-1/2 while you are still a federal employee are: a loan and/or an in-service financial-hardship withdrawal. Neither of these may be rolled into an IRA account.

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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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