Ask The Experts: Money Matters

By Mike Miles

MetLife

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Q. My mother’s plan was purchased by MetLife. She wants to make a withdrawal but is told she can’t, or she needs a higher monthly payment. It’s only $300 due to a paperwork mistake, but she was told she could only submit this one time this year. Is there anything to do?

A. If she bought an annuity, her monthly payments from that annuity are fixed for life. If she has a balance left in her Thrift Savings Plan account, she has the option of terminating her monthly payments with a final, lump-sum distribution of the remaining balance in her account, which she can roll over to an IRA, which will allow her to withdraw money as she likes.

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Military TSP vs. civil service TSP

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Q. I retired from active duty two years ago and have worked in civil service for one year.  I am contributing 10 percent of my civil service base pay and have a fairly good amount in my active-duty military Thrift Savings Plan. I am entertaining the idea of consolidating my TSP plans for a couple of reasons. First, simplicity of managing one account.  Secondly I believe, from what I have read on numerous sites, I will have greater control of current and future funds using the civil service side of TSP versus the active-duty military side. By this, I mean in-service withdrawals, loans, rolling over to another employer’s 401(k) plan (certainty of employment with civil service is at an all-time low), etc. Has my research misled me, or am I partially correct?

A. Convenience is an advantage. The basic rules for the accounts are the same, although you’re separated from military service and an active employee for the civilian account. This means that you may not take a loan from the military account but can take one from the civilian account. You could roll over the military account to an IRA or 401(k) now, but can’t roll over the civilian account. Whether the differences matter to you, or not, will depend upon your circumstances, but everything you need to know is available at www.tsp.gov.

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TSP rollover and FEHB

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Q. I am age 59½, retired from the Postal Service through a Voluntary Early Retirement Authority. I am looking at rolling over my Thrift Savings Plan to a certified financial planner. Could this affect my health benefits or my spouse’s health benefits?

A. It will not affect your Federal Employees Health Benefits eligibility, but I question the wisdom of this move. Why would anyone with your best interests in mind recommend this move? For your benefit or his/hers? The certified financial planner label does guarantee that this person is trustworthy.

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Tax-free TSP rollover

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Q. I understand there is a way to roll over a Thrift Savings Plan account to a Roth IRA so the funds transferred are not taxed. Can you point me to guidelines on how to do that?  I am preparing to retire as a CSRS annuitant.

A. This is only possible with a Roth TSP balance.

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Annual leave

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Q. I have 38 years with the federal government. I have 240 hours of stored leave and, if I save my annual leave this year, I will have 208 hours of annual leave. This equates to 448 hours times my base pay, which is $33.92 for $15,196.

When I retire at the end of this year, can I roll my lump-sum payment over to my Thrift Savings Plan account before taxes?

A. No.

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Roth TSP rollover

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Q. A recent question read in part: “I have more than four years until military retirement (April 2018). At that time, will I be able to transfer all Roth TSP contributions to my Roth IRA? I have no plans of transferring the traditional TSP balance. The goal is to combine Roth TSP/Roth IRA contributions and pay cash for retirement home.”

 I agree that if you take a monthly withdrawal from the Thrift Savings Plan, they take from both traditional and Roth accounts. But I thought the TSP 90 form allowed transfer of Roth TSP contributions to a Roth IRA fund or Traditional TSP contributions to a traditional IRA (essentially a type to type rollover at retirement)? So if they did the transfer of only Roth TSP funds to the Roth IRA, couldn’t they use this strategy (independent of merit)? Is it different with military retirement?

A. You are correct. I misunderstood the constraint imposed as part of the question. You may request a withdrawal, which must include both traditional and Roth money, and then roll over only the Roth part of the distribution.

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Simple IRA and rollover

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Q. I am retired at age 63 from the Postal Service. Can I roll over my Thrift Savings Plan funds to a simple IRA without any penalties before I reach 70½?

A. Only simple IRA money can be rolled into a simple IRA.

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Rolling a TSP distribution over into a Roth IRA

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Q. Can I roll over a Thrift Savings Plan distribution that I received last week to a Roth IRA?

A. Yes, as long as it’s not a required minimum distribution. Your tax preparer is responsible for making sure that you obey the applicable rules, however. Self-preparation of all but the simplest tax return can be hazardous to your financial health.

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Roth TSP

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Q. For the past five years, I’ve been contributing the maximum to the traditional Thrift Savings Plan (balance north of $127,000). In 2014, I plan to switch all contributions ($17,500) to Roth TSP.

I have more than four years until military retirement (April 2018). At that time, will I be able to transfer all Roth TSP contributions to my Roth IRA? I have no plans of transferring the traditional TSP balance. The goal is to combine Roth TSP/Roth IRA contributions and pay cash for retirement home. We don’t want any debt, including mortgage upon retirement.

A. You may not selectively request the distribution of your Roth TSP balance. Any withdrawal will come, pro-rata, from your Roth and Traditional TSP balances, so you may want to use a different strategy for accumulating the funds to buy a home.

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VCP to Roth

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Q. I am confused about the five-year rule for Voluntary Contributions Program funds rolled over into a Roth IRA. If a Roth IRA has been funded for five years, is there still a five-year withdrawal waiting period for funds transferred from a VCP account into that IRA?

A. The five-year clock applies to each conversion, but how it will affect you isn’t clear from the information you’ve provided. The answer depends upon your age and how much you withdraw. I suggest that you read Internal Revenue Service Publication 590 and consult a CPA before proceeding.

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