By Mike Miles
Disability retirement
April 3rd, 2013 | Uncategorized
Q. I am being considered for disability retirement in the coming months. My application is pending consideration from the Office of Personnel Management. I am a GS-14 FERS employee, 54 years old, with about 32 years of service. I have approximately $250,000 in the Thrift Savings Plan, and my allocations are as follows: 15 percent C, 15 percent S and 70 percent I. I realize that is somewhat aggressive, but it has been like that for about seven years or so, and I have been hopeful of the international home run. Regrettably, this hasn’t necessarily come to fruition. I will likely shelter some of my remaining funds in G or F when I find out if my retirement is approved.
If I should retire, I plan to withdraw approximately $150,000 to pay off my mortgage. Therefore, should something happen to me or if the market fails, at least my home is paid for. I will have a reasonable annuity, and my wife draws $1,800 monthly as a service-connected disabled veteran. Combined, I feel we will have adequate income, especially when our mortgage of $1,000 per month is satisfied. Not rich, but with no real debt ($15,000 vehicle loan) consistent income and no mortgage. Sounds OK to me. Or am I off-base?
A. I think that what’s off-base is that, like too many investors, you are willing to gamble — without knowing the odds — with your life savings. If you’re not willing or able to prudently manage the money, then it’s probably your safest bet to use it to pay off your mortgage. At least you won’t lose it overnight. This might mean that later on, however, if you need the money to pay your bills, it won’t be available. There is no easy answer. That’s why I’m in business. If you’d like to discuss your options, you can contact me through www.variplan.com.
Tags: allocation, C Fund, Disability, F Fund, FERS, G fund, I Fund, loan, mortgage, OPM, retirement, S Fund, spouse benefits, TSP
Rolling TSP into spouse’s TSP
March 19th, 2013 | Uncategorized
Q. My husband is a Defense Department term employee. If his term does not get renewed in May, he wants to roll his Thrift Savings Program into my TSP. Would this be allowed?
A. This is not allowed, but he may continue and manage his TSP account for life.
Tags: rollover, spouse benefits, 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
Spousal IRA
February 4th, 2013 | Uncategorized
Q. I retired from the federal service in 2012. I understand that I cannot make any further contributions to the Thrift Savings Plan since I am no longer a federal employee, and that I cannot undertake a traditional or Roth IRA in 2013 unless I have wages. What I am not clear about is the spousal IRA. It appears to me that because my spouse is still working, I could contribute to a traditional IRA in 2013 as a nonworking spouse if he and I met the income and joint filing qualifications. If this is true, could I then transfer that spousal IRA to the TSP even though I am a retiree?
A. Yes.
Tags: IRA, Roth IRA, spouse benefits, transfer, TSP
Mortgage and taxes
January 14th, 2013 | Uncategorized
Q. I turned 62 in December. I am 100 percent disabled from combat wounds. I worked federally for a while and saved $102,000 in a G Fund under FERS. I’m about to start losing my home as my wife will have to retire this year. Without her income, we won’t be able to afford the mortgage (but no credit card or other debt on the house.)
What percentage at age 62 does a 100 percent disabled vet have to pay when withdrawing savings in full? I think it’s stating 20 percent, but that doesn’t seem reasonable. Am I reading it wrong? I want to pay down my home and refinance to lower the payment to keep from going into default and losing it. It’s all we have, and with the market crash, we lost what equity we had in it. We both have AAA credit scores (low 800s) and have held on as long as we can, but the recession and times have finally caught up to us.
Can you explain what would be the best way to pull the money out in full so I can pay off my mortgage and keep my home?
A. While you may wind up owing less when you file your tax return, there will be 20 percent withheld from your distribution against your federal tax liability.
Tags: Disability, distribution, FERS, G fund, income, mortgage, retirement, spouse benefits, taxes, withdrawal, withholding rate
Death benefits
September 24th, 2012 | Uncategorized
Q. I plan to choose an annuity for my Thrift Savings Plan savings that will pay my spouse half if I die. What happens to the balance of my money in TSP if we both should die shortly after the annuity is activated?
A. If you select and pay for the cash refund option, any unrecovered premium will be paid to your beneficiary(ies) as a death benefit. If you do not purchase the cash refund option, then annuity payments stop and no death benefit is paid.
Tags: annuity, spouse benefits, TSP
Rolling over 401(k) into spouse’s TSP
September 19th, 2012 | Uncategorized
Q. My wife recently retired from a state position. She was informed by her human resources/benefits office that she could roll over the balance of her 401(k) into my Thrift Savings Plan. Is this accurate?
A. Wrong! One spouse can’t combine their retirement plan assets with those of the other.
Tags: 401(k), retirement, rollover, spouse benefits, TSP
Rolling over spouse’s 401(k) into TSP?
June 25th, 2012 | Uncategorized
Q. Can a wife roll over her 401(k) distribution into her husband’s Thrift Savings Plan account?
A. No.
Tags: 401(k), rollover, spouse benefits, TSP
401(k) transfer
August 25th, 2011 | Uncategorized
Q. My spouse has a 401(k) from a previous job. Can I add my name to this 401 and transfer it to the Thrift Savings Plan?
A. No.
Tags: 401(k), spouse benefits, TSP
TSP payments to spouse
June 16th, 2011 | Uncategorized
Q: I am retired and have not withdrawn money from my TSP as of yet. It is my understanding that if I should die tomorrow, my spouse would inherit the full amount of my TSP. But when I looked into beginning monthly withdrawals from my TSP, it seemed to say that I had to buy an annuity with my spouse being the beneficiary of 50 percent in the event of my death. Why would my spouse not inherit the full amount?
A: You don’t have to buy an annuity to initiate monthly payments from your account. Use Form TSP-70 to request automatic monthly payments (not an annuity) and your spouse will inherit the balance following your death.
Tags: spouse benefits, TSP, TSP withdrawal