By Mike Miles
March 11th, 2013 | Uncategorized
Q. My husband will be retiring in June 2014. He will turn 50 in March 2014. Can we still contribute the full $17,500 plus $5,500 catch-up (I realize next year contribution limits may increase) even if he is only in for half a year?
A. Yes, as long as his pay will support the deferrals. The limits are not adjusted for partial years.
February 27th, 2013 | Uncategorized
Q. I am over 50, my wife (unemployed) is under 49. In 2013, if I contribute the maximum amount (including catch-up) of $23,000 to my Roth TSP and traditional Thrift Savings Plan, can I also contribute the maximum of $6,000 to a Roth IRA or traditional IRA for a total contribution of $29,000? Can I also contribute the maximum of $5,000 for my wife into a Roth IRA or traditional IRA for a total contribution of $34,000, assuming that I fall within the adjusted gross income limits as addressed by the Internal Revenue Service? If there are limitations on contributing to a Roth IRA or traditional IRA when active in the TSP, what are they?
A. Subject to the income limits outlined in IRS Publication 590, you may contribute to the TSP and an IRA or Roth IRA.
February 20th, 2013 | Uncategorized
Q. The Thrift Savings Plan allows contributions this year of $17,500 plus a $5,500 catch-up, whether to Roth or traditional IRA. Internal Revenue Service rules also allow (for certain income brackets) a Roth contribution of $5,000 plus $1,000 catch-up. Can a person over the age of 55 make the $6,000 Roth contribution allowed under IRS rules to a secondary Roth IRA and still make the difference ($13,000) in a contribution to the TSP?
A. You are always free to make the full Roth TSP contribution. It’s your eligibility to make the Roth IRA contribution that may be limited, depending upon your tax filing status and your income. See IRS Publication 590, which includes a worksheet to determine your Roth IRA contribution eligibility, for the rules.
February 20th, 2013 | Uncategorized
Q. I am covered under CSRS. Can I still open an external Roth account and contribute the $6,000 maximum (plus catch-up)? If so, how would contributing to the Roth TSP interact with contributing to the external Roth?
A. The limits for the two are separate, but your eligibility to contribute to a Roth IRA depends upon your tax return for the year. If your income is too high, your Roth IRA contribution eligibility will be phased out. There’s a worksheet in IRS Publication 590 that will help you determine your eligibility.
January 9th, 2013 | Uncategorized
Q. I am a GS-14 criminal investigator with 16 years covered service, and I am expecting to contribute to the Thrift Savings Plan for another 10 years or so before retiring. I have been contributing the TSP maximum for the past 10 years. What is your guidance with the Roth option? Should I scale back my TSP contribution to the 6 percent minimum to capture the matching contributions and invest the rest with the Roth option?
A. Without a good reason to do otherwise, I prefer the tax-deferred contributions.
January 7th, 2013 | Uncategorized
Q. I am a single FERS employee. In 2012 and prior years, I have been able to contribute the maximum amount to my Thrift Savings Plan account to bring my adjustable gross income below the income phase-out limit to be able to contribute the maximum to a Roth IRA. However, in 2013, I believe my AGI will exceed the limit and I would like to take advantage of the Roth TSP option. If I contribute the maximum $17,500 to the Roth TSP, can I still invest in a traditional IRA? If so, can I take the IRA deduction even though I make more than the $59,000-to-$69,000 Internal Revenue Service limit?
A. You would still be able to make a nondeductible IRA contribution, but your AGI and TSP eligibility may prohibit the deductibility of a traditional IRA contribution. Check with your tax preparer before you proceed.
December 14th, 2012 | Uncategorized
Q. I have elected to switch to CSRS under FERCCA. I understand I will be given the option of the refund of my portion of Thrift Savings Plan contributions. When I left the Postal Service after my first seven years in the 1980s, I withdrew my CSRS money. If I take the refund of my portion of TSP deposit over the CSRS maximum contribution, can I pay back the withdrawn CSRS money without tax implications?
A. The refund of your TSP contributions will be taxable, since you never paid taxes on the money when you earned it. You may then use after-tax money to make a CSRS redeposit, which is not tax-deductible.
December 10th, 2012 | Uncategorized
Q. I plan to retire under FERS law enforcement on May 30, contributing my full $17,500 and $5,500 catch-up contribution in my first 10 to 12 paychecks. If I purposely make larger contributions early in the year in an attempt to reach the annual maximum contribution before retiring, will I lose out on agency matching contributions?
A. Not if you spread the contributions out evenly over the duration of your remaining employment.
December 10th, 2012 | Uncategorized
Q. I am a retired government worker who has contributed the maximum amount to the Thrift Savings Plan. After being retired for several years, I transferred the TSP to a traditional IRA. If I convert the traditional IRA to a Roth IRA, how do I figure my “basis” in the IRA to determine the amount that is taxable?
A. If the only thing you ever put into the IRA was your traditional TSP assets, then the account has no tax basis and is all taxable upon distribution (or conversion). If you have contributed nondeductible or other after-tax money to the IRA, you’ll need to figure out how much. That’s your tax basis. You should consult a CPA for help if this is the case.
December 3rd, 2012 | Uncategorized
Q. I am an unmarried federal employee. I max out my contribution to the Thrift Savings Plan. I plan to work until at least 62, which will give me 21 years of service, or possibly until 65 with 24 years. As a federal employee in FERS and with TSP, what is the best way to provide income for two siblings when I die? I am not opposed to taking a reduction in monthly benefits if that is the best way to do so. My home will be paid off in 2014. I have no other debt and live on about 58 percent of my take-home pay.
A. Mike: Providing income for survivors is a complex exercise, and there is no universally “best” way to do it.
Reg: With one exception, only a spouse (or former spouse by court order) can be provided with a survivor annuity. Here’s the exception: You can elect an insurable interest annuity for someone who is dependent on you financially and is a blood or adoptive relative closer than a first cousin. If you elect an Annuity With a Benefit to Named Person Having an Insurable Interest, the amount your annuity would be reduced depends on the difference between your age and the age of the person you name. I doubt that you can name more than one person to receive an insurable interest annuity. However, that decision will have to be made by the Office of Personnel Management.