By Mike Miles
TSP withdrawal into an IRA
February 20th, 2012 | Uncategorized
Q: I’m currently contributing to the 2050L fund of the Thrift Savings Plan. Is it possible to transfer my TSP funds to a Roth individual retirement account without getting penalized? I don’t want to touch the money, I just want to invest in precious metals instead of Fortune 500 companies and small businesses.
A: If you are age 59 1/2 or older, you may take one age-based in-service withdrawal from your TSP account. Check with a CPA (ideally, the one who will be preparing your tax return for the year) for advice on converting it to a Roth IRA.
Tags: in-service withdrawal, IRA, Roth IRA, thrift savings plan, TSP, TSP withdrawal
Filing jointly with multiple retirement accounts
February 20th, 2012 | Uncategorized
Q: Both my wife and I contributed to a Thrift Savings Plan and an individual retirement account for the 2011 tax year. We filed jointly. My wife maxed out her TSP contributions, but I did not because I was hired midyear. We both maxed out our IRA contributions at $6,000: her to a Roth, me to a traditional. When using an electronic filing program, the software would not include our IRA, but it did so when I ran a fictitious sample filed as a single. Why did the program not deduct the IRA? Is a simultaneous deduction for TSP and IRA allowed?
A: I can’t tell why, with certainty, a particular computer program did what it did, but I can tell you that your income, your filing status and your eligibility to participate in an employer-sponsored retirement plan affect your eligibility to contribute to IRA accounts. See IRS Publication 590 for the rules.
Tags: e-file, filing jointly, Individual Retirement Account, IRA, IRS, thrift savings plan, TSP
Using TSP money for VCP
February 20th, 2012 | Uncategorized
Q: As I understand the Voluntary Contribution Plan, eligible employees can start making deposits at any time prior to retirement. At retirement, they can choose to withdraw the funds or purchase a VCP annuity. Am I correct that after age 59 1/2, I can make a taxable withdrawal from my Thrift Savings Plan and deposit that money into the VCP to be used to purchase a VCP annuity upon retirement?
A: Yes. The VCP doesn’t care where you get the money to make the deposit, as long as it is after-tax money.
Tags: annuity, thrift savings plan, TSP, VCP, VCP annuity, Voluntary Contribution Plan
Making changes to TSP
February 20th, 2012 | Uncategorized
Q: I’m a Federal Employees Retirement System employee and will retire at age 64. I will opt for monthly payments from my Thrift Savings Plan. I know I can change the amount yearly, but can I also change the plan in which the funds are invested?
A: You may change your investment allocation in the TSP as you see fit, within the usual limits, for as long as you maintain the account.
Tags: thrift savings plan, TSP, TSP allocation
Changing to TSP annuity 4 years into retirement?
February 20th, 2012 | Uncategorized
Q: When I retire at age 56, can I take monthly payments until age 60 and then convert part of my Thrift Savings Plan balance to an annuity? Interest rates are at all-time lows, but in four years, with a potential rate increase and me reaching age 60, my monthly annuity payment would be higher than what I could get now.
A: Once you begin monthly payments, your only options are to change the payment amount once each year or request the distribution of your remaining account balance. Purchasing a TSP annuity is not an option at that point. You could, however, have the remainder of your account distributed to an IRA and then use part of your IRA to purchase a retail annuity.
Tags: annuity, thrift savings plan, TSP
IRA and TSP
February 8th, 2012 | Uncategorized
Q: I am 47 and recently retired from active duty because of a 100-percent disability. In a nutshell, my financial sitrep: Roth IRA $60K; Uniformed service TSP $38K; debt $450K (house $400K, Credit Card $29K, Cars $21K), retirement and disability income is $6K per month; one spouse; no children. I am considering rolling the Roth IRA into the TSP and taking a partial withdrawal of $50K to pay off credit card and car loans. We’ve cut back but make little headway against the credit card. I am expected to live another 20-30 years but am unemployable per the Veterans Affairs Department. Is this a good idea? I am open to other options. What fund allocation would you recommend in the TSP for a person in my situation?
A: You’re asking for specific investment advice, which I can’t give you through this forum. I can tell you that you can’t transfer your Roth IRA into your TSP account. You should consider using the L Funds for your TSP investment. Visit www.tsp.gov for information and guidance.
Tags: IRA, L Fund, thrift savings plan
TSP loan repayments and the Roth option
January 12th, 2012 | Uncategorized
Q. Will TSP participants who have (or take out) a loan be able to make the repayments into the Roth portion of their TSP once the Roth option is established?
A. The rules have not been published, yet.
Tags: Roth IRA, thrift savings plan, TSP
Mandatory TSP withdrawals
December 2nd, 2011 | Uncategorized
Q. I will be 66½ when I retire with 15 years of federal service. How long can I leave my money in TSP until I am forced to take it out? Will I have to pay taxes on it when I am forced to withdraw, and is there a penalty accessed?
A. You must begin taking withdrawals – called Required Minimum Withdrawals – by April 1 of the year following the calendar year in which you reach age 71½. Visit www.tsp.gov for more information.
Retirement
December 1st, 2011 | Uncategorized
Q. When I hope to retire in FERS, I will be 62 years old with 28 years creditable service. I will receive TSP payouts, Social Security benefits and a FERS pension. My wife will benefit from Survivors’ Benefits. I’m concerned about what the living costs will be as a retiree.
Will I have to pay federal income taxes on all of the above income that I receive.
I am told that the tax rate is cheaper after retirement. Is that just because there is less income, or is it also because we are in a lower tax bracket?
TSP catch-up
November 18th, 2011 | Uncategorized
Q. I see that 2012 will have 27 pay periods. In current and previous years I divide the maximum allowable TSP and catch-up contributions by 26 to calculate my payroll deductions. Is the process the same in 2012, but divide by 27? Or should I stick with 26 pay periods because 2012 will run to Jan. 12, 2013 and so pay period 27 will be in both tax years 2012 and 2013?
A. Pay and reporting schedules are agency-specific, so you’ll have to ask your payroll or HR officer this question.