By Mike Miles
VCP conversion to Roth
March 21st, 2013 | Uncategorized
Q. I am 66 years old and plan to retire in 2014, at which time I would transfer (convert) my Voluntary Contributions Program monies directly into a newly created Roth IRA. However, I have an existing (non-TSP) Traditional (substantial) IRA (never taxed), and know the Internal Revenue Service will aggregate my Traditional IRA balance for purposes of determining the taxability of this VCP-to-Roth conversion.
If, prior to retirement, I (in 2013) transfer (direct rollover) my Traditional IRA into my existing Thrift Savings Plan account, will those monies now be considered 401(a), and therefore, making my subsequent VCP-to-Roth conversion occur with few tax implications?
A. As I understand the rules, your TSP balance will not be subject to aggregation for the purpose of determining the taxability of your VCP-to-Roth IRA conversion, but you should consult a CPA before going down that path. You may also want to fill in a pro-forma IRS Form 8606 to see how it will look. This is the form used to calculate your tax liability on conversions. Notice that it does not mention an employer-sponsored plan like the TSP anywhere.
Tags: age, IRA, IRS, retirement, rollover, Roth IRA, taxes, transfer, voluntary contributions program
VCP rollover
February 27th, 2013 | Uncategorized
Q. I am 73, retiring March 1. Is it possible to transfer or rollover my entire Voluntary Contributions Program balance into my Thrift Savings Plan account at my age?
A. Only the untaxed earnings may be rolled over into your TSP account. The contributions may be rolled over to a Roth IRA account.
Tags: age, contributions, rollover, Roth IRA, taxes, TSP, voluntary contributions program
Refinancing and VCP
February 11th, 2013 | Uncategorized
Q. I am a 59-year-old federal employee with 34 years of service under CSRS. I am retiring soon and heard about the Voluntary Contributions Program. I don’t have a wad of cash except accessing some of the equity in my home (I have about $200,000 of equity, and I could pull up to $100,000 out). Is it worth refinancing (at a low 3.5 percent) to access the money and use the VCP to convert it into a Roth IRA?
A. Probably not, unless you need the cash for expenses.
Tags: conversion rule, CSRS, retirement, Roth IRA, voluntary contributions program
VCP to Roth IRA
January 28th, 2013 | Uncategorized
Q. I retired from federal service last year. The Office of Personnel Management made a direct rollover of my Voluntary Contributions Program after-tax contributions to a Roth IRA, and a direct rollover of my interest earned on those contributions to my Thrift Savings Plan account. However, OPM will not issue 1099Rs documenting these two direct rollovers, forcing me to file Form 4852 “substitute for 1099-R” with my 2012 tax return. This form requires these two direct rollovers to be identified with a distribution code. Of course, the Internal Revenue Service instructions aren’t that clear about which code is appropriate for each direct rollover. It appears that both Code 7 and Code G are appropriate to use. Is there additional information, applicable guidance or relevant experience to offer regarding the correct codes for these two types of direct rollovers?
A. This is a question for your tax preparer.
Tags: 1099, IRS, OPM, retirement, rollover, Roth IRA, taxes, TSP, voluntary contributions program
VCP into Roth IRA
January 21st, 2013 | Uncategorized
Q. I am in CSRS. Can I still invest after-tax money in the Voluntary Contributions Program and then convert it to a Roth IRA, or have things changed in 2013?
A. To the best of my knowledge, you can.
Tags: CSRS, Roth IRA, taxes, voluntary contributions program
TSP maximum contribution or VCP?
January 14th, 2013 | Uncategorized
Q. I am retiring in June under CSRS at age 54 after 31 years of service (Air Traffic Provision). I have been working outside of the country for the past three years as a loaned executive and have had to pay my CSRS benefits out of pocket to keep my CSRS entitlement while outside of the country. During this period, I have not been able to contribute money into the Thrift Savings Plan since my salary is paid by the out of country organization where I am assigned. I will only return to the Federal Aviation Association for one month before I retire. Should I contribute as much as possible to the TSP in that month, or put money into the CSRS Voluntary Contributions Plan prior to my retirement to maximize savings before I retire?
A. Use Form TSP-1 to elect to defer all of your net, pre-tax pay into your TSP account. Contributing money to the VCP account before you retire, and then rolling over the after-tax balance to an IRA and any earnings to your TSP account is an attractive move if you have the after-tax cash handy and can wait the required holding period before withdrawing from the Roth IRA.
Tags: CSRS, retirement, Roth IRA, taxes, TSP, voluntary contributions program
VCP and Roth
January 7th, 2013 | Uncategorized
Q. I will retire soon and have access to a nice sum of cash that I want to invest. Does it make sense to use the Voluntary Contributions Program to a Roth vehicle to invest all or part of this money?
A. Yes, as long as you can put the money away in the Roth for the required holding period.
Tags: investment, retirement, Roth IRA, voluntary contributions program
Voluntary Contributions Program and rollover
November 12th, 2012 | Uncategorized
Q. I am CSRS and eligible to retire now with 30 years at age 56. My salary excludes my wife and I from funding a Roth with more than $6,000 each year (except $22,500 allowable into new Roth TSP).
Let’s say I put $25,000 into the Voluntary Contributions Program with the intention of making a one-time, lump-sum withdrawal as soon as possible and roll the original $25,000 into a private Roth IRA.
I am told that doing so is a way to immediately fund a Roth that is not limited to my current $6,000 amount mentioned above. Do I understand this correctly, and is there a publication that specifically identifies these options? My financial adviser feels this is too good to be true if true.
A. It’s true. Maybe you should find another financial adviser.
Tags: CSRS, lump-sum, retirement, rollover, Roth IRA, Roth TSP, salary, voluntary contributions program, withdrawal
VCP and Roth TSP
October 9th, 2012 | Uncategorized
Q. Someone asked you online Oct. 8 if they could deposit funds into the Voluntary Contributions Program and transfer “the whole amount” into a Roth TSP. You said “yes.” The poster said they thought they could only transfer interest to TSP.
By asking if they could transfer “the whole amount,” I believe they were wondering if they could transfer both contributions and interest. You have said as recently as an answer given on Sept. 24 that “You’ll have to use a Roth IRA for the after-tax portion of the VCP account,” and gave a corrected answer to a question posted on May 14 that “The Internal Revenue Code permits designated Roth accounts to accept transfers or rollovers only from another designated Roth account. Roth TSP balances are designated Roth accounts (or are treated like designated Roth accounts). The VCP is not a designated Roth account. Therefore, the TSP cannot accept a transfer or rollover from the VCP into a TSP Roth balance.”
It sounds from your most recent answer that something’s changed. Has it? Is it now possible to move VCP contributions to the Roth TSP?
A. Thank you. You’re correct. I made a mistake in the most recent answer — incorrectly reading the question to be about a Roth IRA rather than the Roth TSP. A rollover into the Roth TSP is not allowed, and I have corrected the error.
Tags: contributions, interest, rollover, Roth IRA, Roth TSP, taxes, transfer, voluntary contributions program
VCP
October 8th, 2012 | Uncategorized
Q. I’m CSRS. If I deposit funds in my Voluntary Contributions Program, I thought I could only transfer interest gain to TSP. Can I transfer the whole amount if I choose Roth TSP?
A. You may not transfer or convert money into the Roth TSP. You could roll the money over to a Roth IRA, however.
Tags: CSRS, interest, rollover, Roth IRA, Roth TSP, transfer, voluntary contributions program