Q: If I can withdraw from my TSP if I retire in the year I turn 55 (CSRS) without the penalty, can I also roll over my TSP to a Roth IRA without the penalty? From what I have read, any rollover prior to 59 1/2 would trigger a penalty. Is there any special provision that allows the rollover at 55, like the early withdrawal for federal employees? Because I may be in a higher tax bracket later in my career, I would like to move it now, but not at the expense of the 10 percent penalty. A: If…
Yearly Archives: 2011
Q: I recently paid my loan off but I overpaid it. Will TSP send the remaining balance back to me, or will they put it into my TSP account? A: Since you are not permitted to simply deposit money to your TSP account, the amount should be refunded to you. You should contact the TSP to advise them of the situation and make sure they refund the overpayment.
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.
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? A. All…
Q. I recently donated annual leave for a fellow postal worker who has been injured. Is the value of this donation tax deductible? A. This is really a question for your tax preparer or a CPA, but I doubt that it would be deductible since it has not yet been taxed as income.
Q. I worked for the government for three years a long time ago and returned recently. I will be eligible to retire at age 62 in about three years. I plan to work until 67, if possible. Should I roll over the 401k funds that I have collected into the FERS system? What are the advantages and disadvantages? A. The TSP offers what is, in the opinion of many independent experts, the best retirement investment vehicle available anywhere. It offers low cost, ample diversification options, convenient management and the unique G Fund. I generally recommend that my clients move as…
Q. My activity is offering voluntary separation incentive payments/voluntary early retirement. I am 56 years old, have 22 years in service under FERS. Do I get the 5 percent penalty if I accept the offer? Am I allowed to withdraw monthly on my TSP? A. Since you will retire during or after the calendar year in which you reached age 55, you will have access to your TSP account without the early withdrawal penalty.
Q. If I withdraw $20,000 from my TSP account at retirement, are taxes taken from the amount or do I just have to claim it as income that year? A. Twenty percent withholding is mandatory and you must claim the withdrawal as income on your tax return for that year.
Of all the rules of thumb for living, none are more misunderstood, or more dangerous, than those aimed at retirement financing. Take, for example, the widely quoted — and too often used — rule that you will be comfortable with, and should plan to live on, about 70 percent of your preretirement income in retirement. For some of us, that will be plenty; for others, not nearly enough. Using advice tailored to an “average” employee is risky. In my professional experience, I’ve seen a bias in favor of maintaining, or even increasing, standards of living in retirement. Chances are that…
Q. I’ll be receiving a check this week or next from an inheritance. I’m not maxed out on my TSP and haven’t sent any catch-up money in this year either. I was wondering if I could send 100 percent of my pay for the last couple of pay periods this year to TSP to get as much in there before the end of the year as possible? Then next year I’ll start putting in the maximum along with catch-up. A. Your TSP contributions must come from payroll deferral or, you may transfer eligible money into your TSP account from an…