Q. I am thinking about starting to put my TSP contributions into the new Roth TSP. I already have an adequate amount in the regular TSP, and I am thinking the amount going into the Roth will go to my kids after my wife and I are gone. I understand the inherited Roth TSP will be tax-free to them — is that right? I am disappointed I cannot transfer my Roth IRAs into the new Roth TSP — why is that? A. This is basically correct, if you’re talking about federal income tax. There are rules that must be obeyed,…
Monthly Archives: March, 2012
Q. I have been in the Federal Employees Retirement System as an Army civilian since October 1989 and contribute to TSP. I have active-duty Army time from 1979 to 1989 that I can buy back. I know I should have done this a lot sooner to avoid interest. But I didn’t. Would it still be a worthwhile financial option? I’ve done all the paperwork except to start making payments on the amount determined, which includes about $6,000 in interest and $3,000 for the original amount of the buyback. Would using a TSP loan to pay it all off make sense?…
Q. I will have 40 years with the IRS in 2012 and plan to retire either this year or in 2013. I have been contributing to both the TSP and the Voluntary Contributions Program. I plan to leave the TSP contributions to the G Fund alone and just let it grow. The VCP is another matter. I have a Roth IRA with Vanguard and would like to transfer all of the VCP to the Vanguard Roth IRA.I know I am required to pay tax on the interest the VCP has earned in the year received. The question is how do…
Q. Why are variable annuities such a bad retirement option? I have seen this stated many times, but I’m still not sure why this is the case. On the other hand, I’ve almost never seen any investment outperform the TSP stock funds on a long term basis. I have rebuffed the efforts of my financial adviser (and many other advisers during lectures) to get me to roll over the TSP to “more flexible” IRA options. A. Because they are expensive. Keep your money in the TSP. Your financial adviser is a salesperson who wants the big fat commissions you’ll pay…
Q. I’m recently retired from the federal government. I have currently made no changes to my TSP, leaving everything in my account. Is it generally a good idea to leave your funds in the TSP or should I consider rolling it over to an IRA? Also, what is your opinion of a variable annuity? A. It is generally better to leave your money in the TSP as long as possible. It is the best retirement investment environment there is. In my experience, variable annuities are one of the WORST investment propositions you’ll find. Avoid them unless a trustworthy (competent and…
Q. I am a 50-year-old federal employee looking for a fee-only financial planner to check my finances to see if I am on track to retire when I reach 65. I am not looking for someone to manage my finances — only to check my plan and maybe someone to check in with once ever couple of years. Is this expensive — where do I find someone who is very familiar with the FERS and federal retirement specifically in my area? A. That’s what I do. You may visit www.variplan.com for more information.
Q. If I am still working full time for the Veterans Affairs Department at 70½, do I have to take a minimum distribution from my TSP account? A. You don’t have to begin distributions from your TSP until you stop working for the government.
Q. I am 54 years old with 33 years of federal service, 27 in the Postal Service and six as a military buyback. If the USPS offers voluntary early retirement, Iwould take it; but I have an outstanding loan with my TSP and not enough cash or credit for a loan to pay it off. How would this work? May I use my TSP to pay it back, and would I be able to withdraw funds from TSP, even with the 10 percent tax penalty? How does TSP figure what has been paid in and what is interest accrued, and…
Q. I cashed out $12,000 from my TSP in 2011 and listed it on my tax return as income — and paid income tax on it. Now H&R block is saying I was supposed to pay a penalty on the withdrawal. About five years ago, I cashed out about $10,0000 and don’t remember paying a penalty. I called the IRS and they were clueless. I am 56 years old and don’t retire for about four to five years. I am again contributing to my TSP. Do you know if I was supposed to pay a penalty to the IRS? A.…
Q. I am a federal employee with substantial student loan debt. In an effort to maintain my taxable income as low as possible (I am on an income-based repayment), I contribute the maximum allowable amount to my Thrift Savings account. I would, however, like to contribute additional monies to a traditional IRA account but am uncertain if the tax code allows someone to “double dip” by contributing to more than one nontaxable account. The discussions I have read about this issue are inconsistent. I hope you can provide some insight, A. It is possible to contribute to both, but your…