By Mike Miles
Rolling over post-tax 401(k) contributions into Roth TSP
May 6th, 2013 | Uncategorized
Q. I have a 401(k) plan from a previous job in the private sector that allowed yearly post-tax contributions after the pretax limit contributions had been reached. Can I roll over the post-tax contributions in my 401(k) to the Roth TSP?
A. Not unless the funds are held in a Roth 401(k) account.
Tags: 401(k), contributions, Roth TSP, taxes
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.
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
Roth TSP withdrawal
March 26th, 2013 | Uncategorized
Q. I am 47 and hope to retire at my minimum retirement age in nine years. I contribute to both my traditional Thrift Savings Plan and Roth TSP. A publication I read, “Important Tax Information about Payments from Your TSP Account,” says you will not have to pay taxes for Roth contributions if you follow a two-step rule: Hold for five years + age 59½. But I think it also says that if I transfer my Roth TSP out of the TSP when I retire, the monies will not be subject to taxes. Is this correct?
Can I only roll over my Roth TSP and keep my traditional TSP with the TSP or must I roll over both the Roth and traditional? I ask because I would like to keep my traditional TSP where it is and only roll over the Roth to avoid taxes on distributions that occur before age 59½.
A. The five-year + 59½ rule applies only to earnings, but it applies to both your Roth TSP and a Roth IRA account. You may always withdraw your contributions from either account without tax or penalty. You may transfer all or part of your Roth TSP balance to a Roth IRA, if you are eligible for a partial withdrawal, and leave the remainder in your TSP account, using Form TSP-77.
Tags: contributions, Minimum Retirement Age, partial withdrawal, penalty, rollover, Roth IRA, Roth TSP, taxes, TSP, withdrawal
Transferring TSP funds to Roth TSP
March 26th, 2013 | Uncategorized
Q. Can traditional Thrift Savings Plan funds be transferred/rolled to Roth TSP funds after retirement, while paying taxes on the amount transferred? I’m trying to at least save the taxes on the five-year growth.
A. You may not convert your traditional TSP funds to Roth TSP funds. I’d like to see the math that convinces you that this is a good idea in the first place.
Tags: retirement, Roth TSP, taxes, transfer, TSP
Combat-zone tax-exempt contributions
March 19th, 2013 | Uncategorized
Q. I have both a civilian and military Thrift Savings Plan account because I was mobilized for part of 2011-12. Because I was in a combat zone, much of my income was tax exempt (CZTE). The military allowed me to contribute that tax-exempt income into my TSP. It is not a tax deduction because the income wasn’t taxable in the first place.
However, they also made contributions from my taxable income. I thought it was all from my CZTE. When I returned to my civilian job, I began to contribute and maxed out my contributions, not knowing about the earlier tax-deductible contributions.
Obviously, I over-contributed and just paid the income tax on the “overage.” But that overage is still in the TSP account.
Military: $7,450
CZTE: $13,464
Civilian: $17,540
Catch-up: $5,474 (Roth)
1. How is that taxable (and taxed) overpayment treated within TSP?
2. Can I combine my military and civilian accounts?
3. If combined, can I move the CZTE money into my Roth TSP?
4. Can I move the “overage” that I have now paid taxes on into the Roth, as well?
Both of the amounts I want to move into the Roth have been taxed or were tax-exempt when earned.
A. The usual limits do not apply to TSP contributions from CZTE pay; they only apply to contributions from taxable basic pay, incentive pay, special pay and bonus pay. The Annual Additions Limit under IRC 415c does apply, however, and it limits the total contributions from all sources to $51,000 for 2013. My guess is that the money was just rearranged in the TSP to fall under the applicable limits for the various types and that you do not, in fact, have excess contributions in your accounts. You may combine your military and civilian accounts as long as you are separated from service covering at least one of the accounts and there are no CTZE contributions left in the military account. Those must be withdrawn first, or they money will be distributed to you when your request to combine the accounts is processed. The CTZE money in the traditional TSP account cannot be transferred to the Roth TSP.
Tags: catch-up contributions, contribution limit, deduction, income, military, Roth TSP, tax-exempt status, transfer, TSP
Rolling Roth into TSP?
March 19th, 2013 | Uncategorized
Q. On March 11, you wrote a response to a gentleman who was retiring from the Postal Service and had a question about moving his Thrift Savings Program to a civilian account. In your response you wrote, “You are not required to roll over your TSP account and may continue it for life. You should do everything you can to keep your money in the TSP for as long as possible, since it is superior to any other investment account you will find. Your TSP should be the last account you tap for retirement income.”
That response raised a few questions for me: If someone intends to purchase a life annuity with their TSP upon retirement but also has a non-TSP Roth IRA, do you recommend that they use up all of the Roth prior to purchasing an annuity? Or would you instead suggest that they roll their private Roth into a Roth TSP? And if they do roll it into a Roth TSP, how does the purchase of an annuity work, since some of the contributions were pretax and some were post-tax?
A. You can’t transfer or roll a Roth IRA into the TSP. Which account you use to buy a life annuity will depend entirely on your circumstances and expectations for the future.
Tags: annuity, contributions, rollover, Roth IRA, Roth TSP, taxes, TSP
TSP, IRA and Roth contribution limits
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.
Tags: catch-up contributions, income, IRA, IRS, maximum contribution, Roth IRA, Roth TSP, spouse benefits, TSP