Q: In a Dec. 13 blog post, you answered the following question: “I am a federal firefighter under CSRS Special Retirement due to retire in November 2011 at age 50. At what age will I be able to collect on my TSP retirement?” You said that the writer would be subject to the early withdrawal penalty until age 59 1/2 unless the withdrawal was rolled over, used to buy a life annuity or met one of the other “specific exceptions to the rule.” I’m an 1811-series federal employee, age 52, and will be retiring in 2011. I’ve read that I…
Monthly Archives: December, 2010
Q: I am a retired executive currently working as a re-employed annuitant during parts of the year. I always look forward to reading your Federal Times column. I have a question regarding some advice you provided in the Dec. 13th edition. You indicate that it’s best to use the Thrift Savings Plan’s L Funds as planning guides. You recommend choosing the L Fund that corresponds to your life expectancy and apply its beginning asset allocation to your account, then periodically adjusting the mix. I had always heard that you should choose the L Fund that most corresponds to the date…
Q: Will my Thrift Savings Plan withdrawals be taxed at retirement by the state of New Jersey? A: Making a contribution with after-tax dollars typically creates “tax basis” in your account. As long as you keep good records on the amount of after-tax money you contributed to the account, you should not have to pay tax on those dollars again when withdrawn. I’m not an expert in New Jersey tax law, though, and you should consult a certified public accountant who is for specific advice.
Q: Thank you for agreeing to respond to my New Jersey Thrift Savings Plan taxation question. New Jersey does not permit federal employees to contribute pretax dollars into TSP accounts. Its position is that TSP was not established under a Internal Revenue Code 401(k) plan. As this impacts many thousands of federal workers in the state, my question is: Presumably at retirement, New Jersey TSP participants will be taxed at the federal level for all TSP distributions, and at the state level for distributions minus contributions which NJ previously taxed (let’s hope so; that alone may be a recordkeeping nightmare).…
Q: I am married with no children. What happens to any remaining balance in my Thrift Savings Plan account if my spouse precedes me in death or dies prior to withdrawing all that is in my account? A: According to information provided by the TSP, the following order of precedence will prevail in the event that there is no viable named beneficiary: • To your widow or widower. • If none, to your child or children equally, and to descendants of deceased children by representation. • If none, to your parents equally or to the surviving parent. • If none,…
Q: I read the latest article from Mike Miles in Federal Times and I have a question: I am a Federal Employees Retirement Service (law enforcement officer) employee, and I max out my Thrift Savings Plan contributions. Can I contribute to an outside-brokerage individual retirement account ( I meet the Roth requirements) and if so, what is the cap for that yearly? A: Yes, you may contribute to a traditional IRA, and the limit under current law is $5,000 if you’re under age 50; $6,000 if you’re 50 or older. Some or all of your contribution may be taxable, depending…
Q: I am a Civil Service Retirement System retiree. What happens to my Thrift Savings Plan account after my death? My notes from a retirement seminar 10 years ago say that if my spouse is listed as my beneficiary, she may move my TSP funds into her individual retirement account with no tax or penalty. If my children are listed as beneficiaries they do not have the same option, and in most cases the TSP funds are fully taxable. Is this still correct? A: Your spouse may transfer the balance to an IRA and avoid current taxation or may, under…
Q: I have tried to solicit your opinion several times concerning the taxation of Thrift Savings Plan distributions to individuals who had their contributions taxed going into TSP (because New Jersey doesn’t recognize the tax-exempt status of TSP), but have never received any response. A: I apologize if you did not receive the response you were looking for. I was not aware that I had overlooked any questions. Please submit your question again and I will respond promptly.
Q: My wife and I are both 56 and planning to retire in the next couple of years. Is it possible for my wife to transfer her Army nonappropriated fund employee 401(k) funds into my Thrift Savings Plan account? A: Only if the account contains no after-tax contributions.
Q: My husband is 60 years old and plans to leave his federal agency by Dec. 31. Is it possible to do a partial withdrawal (in-service) based on his age, then roll the balance of his Thrift Savings Plan account into an individual retirement account when he leaves his job? A: Yes, as long as he hasn’t taken a partial withdrawal in the past.