Q. I am a federal employee with more than 34 years of service under CSRS. I am planning on retiring Jan. 3, 2013. The amounts I earn in pay period 26 (Dec. 16-29, 2012) and pay period 27 (Dec. 30, 2012-Jan. 12, 2013) will not be paid to me until after Jan. 1, 2013, and will therefore be shown as taxable income on my 2013 W-2. Can I designate 100 percent of my net earnings for those two pay periods to my Thrift Savings Plan to reduce my taxable income for 2013 and maximize my TSP account? A. You may defer…
Monthly Archives: April, 2012
Q. My husband and I are federal retirees (both 65). We are buying a second home. We are contemplating withdrawing our down payment (50 percent; $130,000) from our Thrift Savings Plans. We are trying to determine the best way to handle the tax issue. Does it make more sense taxwise to withdraw a large amount (130,000) and incur the 20 percent tax hit, or make a lower down payment (20 percent; $52,000) and request an annuity of $1,000 per month, thereby reducing our yearly tax liability? We are currently in the 25percent tax bracket. A. The only way to answer this question responsibly…
Q. I am in the military and have a Thrift Savings Plan account set up. I put 10 percent of my paycheck a month into that account. Can I also put $5,000 into a Roth IRA if I am already doing the TSP, or is it a max contribution of $5,000 between them? A. Your eligibility to contribute to a Roth IRA will depend upon a number of factors, including your age, marital status, income and eligibility to participate in an employer-sponsored retirement plan, like TSP. See IRS Publication 590 for details, or ask your tax preparer for help in…
Q. As I read the information in the retirement pamphlets, it states that “a blood or adopted relative closer than first cousins (this includes children, siblings and a parent) are presumed to have an insurable interest.” If I retire in good health, could I elect an insurable interest survivor benefit for my adult son or daughter (blood relatives) even though they are not my dependent or disabled? A. Yes.
Q. I am 62 and last year (taxable 2011) withdrew my Thrift Savings Plan in a lump sum. Taxes of 20 percent were taken out. But on computing taxes this year, I was a bit surprised with the resulting tax bite. Adding in the lump sum doubled my income and pushed me into the 28 percent bracket. I know we no longer have income averaging, but is there anything I might have missed that might smooth out this one-year spike in income? A. Not that I’m immediately aware of, but you should run the question past your tax preparer.
Q. I’ve been putting about $2,500 a year into the G and F funds. Should I continue to do that, or switch to an L Fund or perhaps a Roth? I’m 25 with four years of service in? A. Sorry, but we don’t give individual investment advice through this forum. Your asset allocation seems very conservative for your age, however.
Q. I began putting money in the L2030 in 2008 and didn’t really start to pay attention to it until mid-2011. When I noticed I had about $30,000 in it, I didn’t want to lose it to the current volatility. So I put it all in the G Fund and then the market started to increase. Does it make sense to go back to the L2030 since share price has increased $2.80 per share from when I left it, or is it better to wait until the price is closer to when I left it? I think I will just…
Q. On several occasions, you have stated that taking your Voluntary Contributions account as additional annuity (which pays about 7 percent to 8 percent depending on age) is not such a good deal compared to investing the money and taking the investment earnings. But would you say that it is a very good deal compared to using the account to purchase an annuity from an insurance company which pays way less than 7 percent to 8 percent (say 3 percent)? A. It would depend upon the specifics of the annuity you’re considering and your circumstances. It’s impossible to give a…
Q. Can I designate my adult, nondependent child as a beneficiary for my Thrift Savings Plan lifetime annuity? Would they be considered an “insurable interest”? This would be a perfectly healthy adult child that may or may not be married at any given time. A. You may name anyone you choose as a beneficiary for your TSP life annuity. There is no insurable interest requirement for beneficiaries.
Q. I recently transferred my “entire” traditional Individual Retirement Account from Fidelity to the Thrift Savings Plan. When I started the IRA in 1983, I opened it with pretax money. From that, there was a front load cost. To the best of my knowledge, they rolled all of it over. How does that affect the tax situation? Is that previously taxed money identified? A. When you moved it into the TSP, you signed a statement that it was all pretax money. It will all be taxed as ordinary income when withdrawn.