By Mike Miles
TSP
May 13th, 2013 | Uncategorized
Q. I am a fully vested CSRS employee with the Environmental Protection Agency for 33 years at age 55. I have received my numbers, but I missed my first date to retire. How long does it take to receive my first full check? Should I take all of my Thrift Savings Plan out at once; leave about $10,000 in and roll it over to a Roth IRA; or leave it in the TSP? Is there a counselor at TSP to speak with about taxes and IRAs.
A. You should leave your money in the TSP for as long as possible and consult your tax preparer or a financial planner with your tax questions.
Tags: CSRS, retirement, rollover, Roth IRA, taxes, TSP, vested
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
Taxes and transferring TSP to Roth IRA
May 9th, 2013 | Uncategorized
Q. Upon retirement, I’m considering transferring a portion of my Thrift Savings Plan balance in monthly payments directly into a Roth IRA. Since my TSP is pretax, I understand that taxes will need to be paid on these funds upon conversion to a Roth. I am in a state with no income tax on federal pensions and distributions from the TSP (North Carolina) and want to be sure that this transfer from my TSP to the Roth will be considered a TSP distribution for tax purposes, and therefore, subject to federal and not North Carolina taxes. Does the Office of Personnel Management issue a 1099R for such a transaction to generate the tax liability?
A. Yes.
Rolling Roth IRA into Roth TSP
May 6th, 2013 | Uncategorized
Q. I would like to roll over my Roth IRA into my Roth TSP. Do you see the government allowing this some day?
A. It’s possible, but I can’t handicap the odds. While it would be nice to be able to do this, it shouldn’t be significant in the big picture. If it is, you’re doing something wrong. You should focus on making sure that your Roth IRA is as close to the Thrift Savings Plan in its low cost, simplicity and diversification as possible.
Rollover from private Roth to Roth TSP
May 6th, 2013 | Uncategorized
Q. I retired in 2011 before the Roth TSP was created. Can I roll over a private Roth to the Roth TSP?
A. No.
TSP vs. Roth IRA
April 29th, 2013 | Uncategorized
Q. I am a fully vested CSRS employee with the Environmental Protection Agency for 33 years at age 55. I have received my numbers, but I missed my first date to retire. How long does it take to receive my first full check? Worst-case scenario? Best-case scenario? And is there any way to speed up processing?
When will I receive my annual leave payment? Will it be immediate in one lump sum without taxes since I already paid taxes on my leave?
Should I take all of my Thrift Savings Plan out at once or leave about 10,000 in and roll it over to a Roth IRA or leave it in TSP?
Is there a financial counselor at TSP to speak with about taxes and IRAs vs. TSP?
I was told the first three days of the month or the last day of the month are the best times to go out to receive the check earlier? Is this a good idea?
A. Mike: You should leave your money in the TSP for as long as possible, since it is the best retirement investment vehicle you’ll find. You’ll find information about taxes and the TSP at www.tsp.gov. You may contact the Thrift Line with your specific questions, although I doubt they’ll help you with questions about IRA taxation.
Reg: I don’t know how long it will take for you to get your first full annuity check; nor, I expect, does anyone else. However, once your retirement package arrives at the Office of Personnel Management, they will put you in interim pay within a week or two. A complete and accurate retirement package speedily sent to OPM by your agency is the best hedge against delayed processing.
You’ll have to ask your agency when it will send you your lump-sum payment for unused annual leave. That can’t happen until your agency closes out your account. Since you couldn’t have paid taxes on that money until it was received, it will be treated as ordinary income from which taxes will be deducted.
To pick the best date to retire, try to find one that is at the end of a pay period — to get credit for any annual and sick leave you earned during that pay period — and as close to the end of a month as possible — so the time between when you are employed and on the annuity roll is as short as you can make it. Note: As a CSRS employee, you can retire up to the third day of any month and be on the annuity roll in that month. While you will be paid for the additional days you are employed, your first month’s annuity will be reduced by 1/30 for every day you are still employed.
Tags: annual leave, annuity, CSRS, lump-sum, retirement, rollover, Roth IRA, taxes, TSP, vested
TSP rollovers
April 22nd, 2013 | Uncategorized
Q. The guidance on partial withdrawals from the Thrift Savings Plan is somewhat confusing if you have both a traditional and Roth portion. It says that withdrawals will be prorated between the two. However, is it possible to solely roll over the Roth portion into another Roth and still leave the entire traditional portion in tact? Or, since these are two distinct types of investments, can the Roth be rolled over into a Roth and the traditional be rolled over into a traditional in amounts, say $5,000 of one and $10,000, even if the balances are not in this same 1:2 ratio?
A. Distributions are prorated between the two accounts, while direct transfers (rollovers) may be designated as applying to each type of money, independently. I suggest that you review Form TSP-77 to see what can and can’t be done.
Tags: distribution, investment, partial withdrawal, rollover, Roth IRA, TSP
401(k) distributions at age 55
April 9th, 2013 | Uncategorized
Q. So if I follow all the rules related to my current Thrift Savings Plan account, and I begin making systematic withdrawals under the annuity factor method at age 55:
1. Can I contribute to my new employer’s 401(k) while drawing from my TSP? (I may want to take a downscaled job and subsidize the lower income with my TSP distributions.)
2. Are any Internal Revenue Service restrictions in place regarding my Roth IRA because I am taking distributions from my 401(k) at age 55?
A. Yes, you may contribute to a 401(k) while taking distributions from your TSP account, and no, there are no special rules limiting Roth IRA contributions because you are taking withdrawals from your TSP or 401(k) account. Only the usual income limits apply.
Tags: 401(k), age, annuity, contributions, distribution, IRS, Roth IRA, taxes, TSP
Roth TSP
April 3rd, 2013 | Uncategorized
Q. I have been contributing to my traditional Thrift Savings Plan for the past 3½ years and have accumulated about $7,000. With the introduction of Roth TSP, I was wondering if I should stop contributing to my traditional TSP and start a Roth TSP. I plan on being in a higher tax bracket when I retire, and I also have a Roth IRA.
A. If you’re confident that your tax rate will be higher on the contributions later than it is now, you should contribute the Roth TSP first.
Tags: contributions, Roth IRA, Roth TSP, taxes, TSP
Roth TSP rollover
April 2nd, 2013 | Uncategorized
Q. If I contribute $40,000 to my Roth TSP account, it grows to $60,000 and I subsequently leave government service and roll that Roth TSP into a Roth IRA, wouldn’t I be able to immediately withdraw up to $40,000 without tax or penalty, even though I’m less than 59½ and have not had either account for more than five years?
A. Yes, it is possible to withdraw your contributions at any time without tax or penalty.
Tags: penalty, rollover, Roth IRA, Roth TSP, taxes, withdrawal