By Mike Miles
December 31st, 2012 | Uncategorized
Q. I retired in April 2008 and took a lump-sum distribution from my Voluntary Contribution Plan, with the interest going into my Thrift Savings Plan and the principal amount going into my money market fund. Is it still possible to take the entire VCP principal amount and put it into a Roth IRA four years after retirement? When I attended various CSRS federal retirement seminars in 2007 and 2008, I was never informed of the option to transfer the principal amount to a Roth IRA.
A. This is not possible.
June 11th, 2012 | Uncategorized
Q. I have received several inquiries about establishing Voluntary Contribution Plan accounts with the Office of Personnel Management, funding the account and then rolling those voluntary contributions into a conventional Roth plan administered in the private sector once the employee has retired.
I am a little skeptical about the prudence of this. It appears to me on the outside that this is simply a way of talking people into using the federal government to change the “color of money; read: launder” and then roll it into a Roth where a plan administrator will now make a fee on your hard-earned dollars.
It just sounds like it would not be in the best interest of the employee/soon-to-be retiree. My gut tells me this is wrong on so many levels.
A. This is a legitimate way to convert a taxable investment into a tax-free investment. The choice of investment custodians and securities is up to you and doesn’t necessitate higher costs.
June 7th, 2012 | Uncategorized
Q. I will be retiring June 30. I contributed $100,000 to my Voluntary Contribution Plan account between September 2010 and the present. I plan to roll over the $100,000 to my Roth IRA upon retirement; have the Office of Personnel Management withhold 20 percent for tax on the interest that it earned; then roll over the remainder to the Roth IRA also. Is that doable?
A. The accrued interest will be considered a conversion. I believe that is doable, but you should check with your tax preparer to be sure.
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.